FDI AS A CONTRIBUTING FACTOR TO ECONOMIC GROWTH IN BURKINA FASO: HOW TRUE IS THIS?

Abstract

Much emphasis has been placed on attracting Foreign Direct Investment (FDI) into Burkina Faso as a catalyst for improved economic growth within the economy. Against the lack of empirical evidence for evaluating this claim, we use data collected from 1970 to 2017 to investigate the FDI-growth nexus for the country using the ARDL bounds cointegration analysis. Our empirical model is derived from endogenous growth theoretical framework in which FDI may have direct or spillover effects on economic growth via improved human capital development as well as technological developments reflected in urbanization and improved export growth. Our findings fail to establish any direct or indirect effects of FDI on economic growth except for FDI’s positive interaction with export-oriented growth, albeit being constrained to the short-run. Therefore, in summing up our recommendations, political reforms and the building of stronger economic ties with the international community in order to raise investor confidence, which has been historically problematic, should be at the top of the agenda for policymakers in Burkina Faso.