The impact of foreign direct investment and international remittances on poverty: evidence from Sub-Saharan African Countries in 1996–2017

Abstract

This paper investigates the causal relationship between Foreign Direct Investment, remittances and poverty in Sub-Saharan African countries using simultaneous equations models over the period 1996–2017. Global panel results showed that there is a bi-directional causal relationship between remittances and poverty as well as FDI and remittances. However, there is unidirectional causality from FDI to poverty. The results suggest that there is a bidirectional causality between remittances and poverty in Sub-Saharan Africa, West, East and South Africa, while unidirectional causality from remittances to poverty in Central Africa. Other results show that in Central, East and South Africa, there is a bidirectional causality between FDI and poverty, while unidirectional causality from FDI to poverty in Sub-Saharan Africa and West Africa. Policy implications of this study suggest that essential for governments in Sub-Saharan Africa give great importance to increase the inflow of remittances to support the achievement of Sustainable Development Goals for 2030.