Foreign Direct Investment, Exports and Economic Growth

Abstract

The aim of this paper is to analyze the relationship between foreign direct investment (FDI), economic growth and export in host countries is known to have an important role in economic literature suffering from unemployment problems and lack of technological progress. Given that these countries are at different stages of growth were explored this issue West Africa by applying the Pooled Mean Group (PMG) and the Granger causality test in the period 1980 to 2014 by using panel data. The initial panel Granger causality results confirm that there is no significant Granger causality from FDI to economic growth, from economic growth to FDI, from export to economic growth and from economic growth to export in the short run in West Africa. However, in the long run, The Pooled Mean Group (PMG) estimation analysis reveals that economic growth as the common factor that drives growth in other variables such as FDI inflows and exports. The article supports the FDI-led growth and Exports Led Growth hypothesis for West Africa. This implies that the improvement in the export sector may enhance the economic growth activities in West Africa and a common experience in attracting FDI.