Abstract:
There is a widespread belief in transition and growing economies that the
relationship between FDI and Growth is symmetrical. On the other hand, the
problem of the nonlinear impact of FDI on Growth has remained insufficiently
explored. Moreover, previous studies did not account for the transmission
process through which FDI transact to economic growth of sub-Saharan
economies. Using panel data from 30 sub-Saharan African countries spanning
from 1990-2019, this study re-examines the influence of FDI on economic
growth. The findings revealed that the influence of FDI on economic growth
was negative and significant in the short run when the transmission channel in
the industry sector was taken into consideration. However, in the long run the
results was significant for all when the conditional sectoral effect was taken
into consideration. The growth enhancing effect of FDI was largely seen to be
insignificant when the asymmetric effect was taken into consideration. A
higher and a lower inflow of FDI was seen to be only significant on economic
growth from the transmission in the agricultural and the service sector. This
study discusses that much emphasis should be placed on developing the
various sectors through which FDI transact into economic growth.
