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Globalization, foreign direct investment and economic growth in Sub-Saharan Africa

Globalization, foreign direct investment and economic growth in Sub-Saharan Africa

By Saibu M. O and T. O Akinbobola

This paper examines contributions of foreign direct investment and globalization to real economic growth fluctuation in selected sub-Saharan Africa countries. Adopting the conventional vector autoregressive mechanism and the time series data from the selected countries, the result showed that out of the eleven countries studied, foreign direct investment explained the highest proportion in just three countries, Morocco, Ethiopia, and Zimbabwe. Except in Tunisia, Tanzania and Kenya, where the degree of economic openness explained substantial proportion of the output fluctuations, the variations in most of the countries were explained by factors beyond foreign direct investment and economic openness.

The result supports the existing finding on African economies that trade liberalization had not substantially impaired the economic growth process of the sub African economies as alluded to by previous studies. The upsurge in the capital flows to African economies was also insufficient to insulate the economy from the global meltdown and furthermore kick start post crisis economy recovery in Southern African countries. Therefore, the paper concludes that fluctuations in real economic growth in these countries might be beyond the external shocks from the capital inflows and trade flows.

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