Underscoring the Agents of Sustainable Growth in Developing Countries: The Case of Senegal

The study analyzes the impact of foreign aid on Tanzania’s economic growth from 1988 to 2022, contributing to debates on external financial assistance in developing economies. Using augmented Dickey-Fuller (ADF) tests, autoregressive distributed lag (ARDL) bounds test, and vector autoregression (VAR), it examines the relationship between GDP growth, foreign aid, inflation, exchange rates, and external debt. The findings confirm cointegration and a long-term relationship among these variables. Regression analysis shows that all variables, including foreign aid, positively influence GDP and foster economic growth. However, the study reveals that while foreign aid supports short-term GDP growth, its long-term effectiveness depends on macroeconomic stability, especially managing exchange rates and inflation. It challenges simplistic views of foreign aid’s benefits and stresses the need for strategic policies for sustainable development in Tanzania. The research advocates for government measures to encourage foreign aid and foreign direct investment (FDI) while maintaining openness to international markets. These strategies can boost the economy, create jobs, reduce poverty, and control inflation. Although limited by historical data and its focus on Tanzania, the study opens pathways for further research, including comparative studies with similar economies. Overall, it highlights the constructive role of foreign aid and FDI in economic growth and the importance of supportive policies for sustained expansion.

The purpose of this study is to analyze the causal relationship of external debt and balance of payment with foreign direct investment (FDI) in Bangladesh for the period of 1980 to 2017 through the application of Johansen Cointegration technique, Vector Error Correction Model (VECM), and Granger Causality approach. Results of cointegration and VECM indicate a significant long-run relationship between dependent (FDI) and independent variables (external debt and balance of payment). External debt is found to have a significant negative impact on FDI in the long-run, but it is found insignificant in the short-run. In contrast, the balance of payment has a significant positive effect on FDI both in the long-run and short-run. Results of the Granger causality test reveal that there exists bidirectional short-run causality between the balance of payment and FDI; that is, both the balance of payment and FDI affect each other. But no unidirectional or bidirectional short-run causality is found between external debt and FDI. Keywords: FDI, external debt, balance of payment, cointegration, VECM, causality

During the late 1970s and early 1980s, many African countries experienced a profound slowdown in economic growth. The growth rate of real per capita GDP fell from 0.4% per year during the 1973-80 period to 1.2% per year during the 1980-89 period.' The causes-internal and external-of Africa's economic decline and the strategies for restoring economic growth are much debated. Nevertheless, broad consensus has emerged on the importance of (i) increasing total investment and (ii) promoting private-sector development and increasing its share of total investment for long-term growth.2 It is widely recognized that gross domestic investment fell substantially in Africa during the 1980s and remains severely depressed across the region. The proportion of total domestic investment in GDP fell from 20.8% per year during 1973-80 to 16.1% per year during 1980-89. In some countries, investment has fallen to less than 10% of GDP-a level that is insufficient even to replace depreciated capital. In Africa, the minimum investment needed to replace depreciated capital is estimated at 13% of GDP.3 In recent years, there has also been a growing recognition among many African leaders, faced with new realism and pragmatism, that the private sector could play a significant role in economic development. The focus in the longer term of structural adjustment programs and sectoral reforms adopted by these countries is on creating more appropriate incentives and a framework for private-sector development as the basis for achieving sustainable economic growth. In addition, multilateral and bilateral institutions have developed new initiatives with priorities for private-sector development. In 1989, the International Finance Corporation, an affiliate of the World Bank, es-

The study examines the impact of foreign capital flows on economic growth in Vietnam over the period 1989-2019 using autoregressive distributed lag (ARDL). The findings indicate that there exists a long-run relationship between economic growth and foreign capital flows. Foreign direct investment stimulates economic growth both directly and indirectly since the findings indicate that in both the short and long run, foreign direct investment has significantly positive effects on economic growth. Foreign direct investment can also indirectly affect growth through appreciation of human capital due to the existence of a bi-directional Granger causality relationship between human capital and foreign direct investment. Our findings suggest that foreign direct investment and human capital are complementary to improving economic growth and Vietnam should promote foreign direct investment with enhancing human capital accumulation. External debt, however, has an insignificant impact on growth and the impact of foreign aid is also negative. Vietnam, therefore should not rely on external debt in the long run and allocate the effectiveness of foreign aid to achieve the optimal target.

Development projects are at the heart of government borrowing, with the goal of transforming the economy. However, excessive borrowing has resulted in a massive debt for Ghana. As a result, this research aims to examine, using annual time series data, the trends and effects of Ghana's external debt and service on GDP growth from 1980 to 2014. Aside from GDP, the variables that were analyzed included gross domestic investment, population, foreign direct investment, openness to trade, and the ratios of external debt to GDP and the percentage of GDP used to service that debt. Exogenous Solow growth models were used to examine the effects of external debt burden on GDP growth separately from those of the standard Solow growth model. Two different models are being used, one to look at what is causing an increase in the country's external debt and how that will affect GDP, and the other to look at how servicing that debt will affect GDP growth. OLS estimation method was used, backed by Bruesch-Godfrey test, Koenker-Basset (KB) test statistics, Cobb Douglass estimation function, and STATA statistical package (version 2012) for the regression analysis. Tests for autocorrelation and heteroscedasticity were passed by the models. For both models, the R2 value and F-statistic (Prob>F 0.000 is less than 0.05) indicate that the independent variables account for approximately 99.51 percent of the GDP variation. For the sake of comparison, we can see that all but one parameter in both models is statistically significant (the population coefficient in the second model). According to Simon (1987), Todaro and Smith (1990), and others, GDP and population (POP) have a positive and significant relationship, as do gross domestic investment (INV) (2012). Foreign direct investment (FDI), the external debt ratio (EXD), and the debt service on the country's external debt are all positive, as predicted a priori; however, all four of these variables are negative. Despite this, the coefficient of external debt to GDP is higher than the coefficient of debt service on external debt. An increase in external debt of 1 percent of GDP results in a 0.2285 percent reduction in GDP, whereas an increase in external debt servicing costs results in a 0.069669 percent reduction in GDP. This means that Ghana's external debt should be constantly monitored by the government, and debt should not be allowed to exceed a maximum limit in order to avoid overhanging debt. The government must properly monitor funds to ensure that they are used only for the intended purpose. As a second step, the government of Ghana should concentrate on other strategic economic areas. Because of their high multiplier effect, investments in infrastructure, agriculture, and other sectors should be prioritized. As a result, the total amount of debt owed will be reduced. Finally, Ghana's economy can't solely rely on its external, or foreign, debts, which are always a drag on growth. To determine whether or not they need additional financing, the government should compare their economy's health to fiscal discipline, which governs fiscal policy.

The document analyzes the relationship between FDI (Foreign Direct Investment), ICT (Information and Communication Technology), and economic growth in Morocco for the period from 1990 to 2021 using the ARDL model. Three models have been evaluated, with economic growth, FDI, and ICT as dependent variables in each respective model. In model (1), the results indicate that in the short term, economic growth is not positively related to FDI and ICT. However, in the long term, FDI positively contributes to economic growth, while ICT negatively affects it. A controlled inflation rate has a positive short-term effect, and the level of education shows a positive relationship in both the short and long term. In Model (2), economic growth and government spending have a significant short-term effect on FDI, while ICT has no effect. In the long term, economic performance and inflation remain important for FDI. Model (3) confirms a significant short-term relationship between FDI and ICT, with a negative impact. However, ICT is positively influenced by the inflation rate and the level of education. In the long term, FDI, demographic changes, and education have favorable and significant effects, while economic growth has a negative impact. Regarding the Granger causality test by Toda-Yamamoto, the cause-and-effect relationship between ICT and economic growth is strong and unidirectional, while economic growth influences the level of ICT development. On the other hand, the causality between FDI and ICT concerning economic growth is indirect and depends on factors such as population growth, education level, and inflation rate. JEL classification numbers: C190, F21, F30, L96, O55. Keywords: Economic growth, FDI, Information and Communication technology, ARDL model, Toda-Yamamoto causality.

The paper empirically explores the impact of external public debt in Ukraine on key macroeconomic indicators such as real GDP growth, real effective exchange rate, and current account balance. The problem of increasing external debt affects not only the problems of balance of payments fluctuations but also economic security and economic growth. We have tested the hypotheses regarding the impact of Ukraine’s external public debt on these indicators in the short and long run. As an empirical tool for hypotheses testing vector autoregression models (VaR models) have been chosen. The results of constructed models show the acceleration of the external public debt growth provokes the GDP growth rate to fall with subsequent macrostabilization. The reaction of the GDP growth rate to the shock of the real effective exchange rate is more noticeable. The shock of real effective exchange rate has led to increase in external public debt with a further dampening to zero.Empirical data from the VaR model confirm that external debt has a negative impact on GDP and essentially behaves similarly to the shock of REER strengthening. Research results confirm the relationship between external public debt, real effective exchange rate, and GDP growth in Ukraine. Based on the models it was analyzed the external public debt and real effective exchange rate shocks influence the real gross domestic product growth rate. The growth of external public debt leads to the GDP growth rate fall by 1% during a year and a half with subsequent stabilization in the future. GDP growth fluctuations are explained mainly by their own fluctuations while external public debt is accounting for 2,5—8% of its fluctuations. Fluctuations in external public debt of 7—10% are explained by current account fluctuations in Ukraine. The described results of the model correspond to the concept of dependent economy.

This study aims to look at how capital inflows affect economic growth in South Asian countries. Gross Domestic Savings (GDS), Foreign Direct Investment (FDI), Foreign Portfolio Equity Investment (FPEI), Foreign Debts (F.Debts), and Foreign Aids (F.Aids) are the study's independent variables, while Gross Domestic Product Growth (GDPG) is the dependent variable. Data has been collected from World development Indicator and Quandl from 1980 to 2018. To analyse the data Panel ARDL (PMG) model was utilised. Gross domestic savings, foreign direct investment, and foreign aid, all exhibit positive and strong long-term connections with GDP growth. Results also revealed that there are negative and strong long-run links between GDP, Foreign Portfolio Equity Investment, and Foreign Aids. There are negative and insignificant links between GDP growth, Foreign Direct Investment, and Foreign Aids. Results also reveal the positive and insignificant connections between GDP and GDS, FPEI, and foreign debt. The data imply that institutional improvement has an impact on capital inflows and economic growth. The study has policy implications for government and policymakers in the sense that capital flows and economic growth can improve the institutional environment.

Net trade and Foreign Direct Investment (FDI) are both important factors of economic growth and development in Sub Saharan African (SSA) region. Many different studies have shown the impact of trade and FDI in economy growth in SSA countries. However, few is known about the effect in SSA region in overall. To use these factors in policy making and development planning, the following questions need to be addressed. As both factors impact the economy growth, can net trade (NT) historical performance be used to forecast FDI? Is there any short-run or long-run relationship effect among GDP growth, FDI and net trade? This paper has implemented the cointegration methodology to analyze the impact of net trade and FDI on GDP growth, used the Vector Error Correction Model (VECM) for long-run and short-run relationship effect, an Ordinary Least Square (OLS) regression to determine the significant impact of FDI and net trade on GDP growth and finally the granger causality test. This study shows a positive long-run relationship effect of FDI on GDP. The positive short-run effect of both FDI and net trade is also detected on GDP growth. The regression result shows that net trade has a significant impact on GDP growth and finally from the Granger causality test, the study shows that net trade Grangercause FDI.

Analysis of Net Trade, FDI and GDP Growth Using Cointegration, Vecm, Granger Causality and a Regression Approach: A Case Study of Sub Saharan African Region

Achieving higher level of economic growth in order to enhance social welfare is one of the primary motives of every country. However, developing countries have yet not achieved the desirable level of economic growth due to several socioeconomic and political factors prevailing domestically as well as globally. Therefore, the main purpose of this study is to empirically examine the effects of various external sources namely foreign remittances, foreign direct investment (FDI) and some other notable variables exports and investment on economic growth measured by real GDP per capita in 12 countries from Europe and Central Asia (ECA). This study utilizes annual panel data over the period of 1993–2013 for empirical investigation. After checking stationary properties of the data, Panel Ordinary Least Squares, Fully Modified OLS and Dynamic OLS methods have been employed as analytical techniques for parameters estimation. Empirical result reveals that foreign remittances and FDI inflows have significant positive effects on economic growth in ECA during the period under the study. In addition, the empirical results show that exports and investment also accelerate economic growth. The results of Dumitrescu and Hurlin causality test demonstrate that foreign remittances cause economic growth and economic growth causes FDI inflows. The feedback effect exists between external debt and economic growth. Economic growth leads exports validating growth-led exports hypothesis. Incoming FDI causes exports and exports cause FDI in Granger sense. Furthermore, the feedback hypothesis is valid for foreign aid and external debt, exports and external debt, exports and investment. The main points emerging from this study purport that both foreign remittances and FDI inflows are vital sources of economic growth in ECA. The findings are expected to guide the management authorities with reference to the effects of foreign remittances and incoming FDI on ECA economic growth and development. Moreover, ensuring macroeconomic stability in the recipient countries can help to create environment conducive to investment, thus, encourage immigrants and foreign investors to transfer remittances and make investments with higher degree of confidence. Consequently, it would have a positive multiplier effect on the entire macroeconomic performance of ECA economies.

Economic theory argues that foreign direct investment (FDI) and external debt are expected to enhance economic growth in any given economy. Consequently, this study (i) investigated the relationship between foreign direct investment, external debt servicing, and economic growth in Nigeria; (ii) investigated how foreign direct investment and external debt impact Nigeria’s economic growth; and (iii) analyzed the direction of causality among the three macroeconomic variables. Descriptive statistics, time series autoregressive distributive lag, and robust Granger causality tests were adopted as the estimating techniques. The results showed that from 2011 to 2022, Nigeria’s FDI continued to decline, Nigeria’s external debt servicing continued to grow on an upward trajectory, and the growth of the GDP has been meandering. ARDL analysis results confirmed that the lag of FDI and current exchange rate exert positive effects on current economic growth in Nigeria, with a 1% increase in FDI, current external debt, and current exchange rate increasing growth by 1.49%, 1.58%, and 0.02%, respectively. Results from the Granger causality showed that FDI and external debt do Granger cause GDP in Nigeria. Policymakers should focus on prudent debt management practices and strive to reduce domestic debt levels.

This study investigates the relationship between external debt and economic growth in the Uzbekistan during the period 2010–2020. Two-step Engle and Granger Cointegration method is employed to determine the cointegration relationship between external debt and GDP growth. Our findings show that there is a negative significant relationship between external debt and economic growth. We can also observe that a 1% increase in external debt will lead to a 24% decrease in GDP growth. Also the results of ECM model suggests that if economic shocks and periodic downturn occur in GDP as a result of external debt, then 86.0% will return to its equilibrium in each subsequent short period. This suggests that GDP growth may return to its equilibrium after a period of 1.17 (1/86) from debt crisis and shocks. KEYWORDS: economic growth, cointegration, debt overhang, external public debt, error correction model.

The increasing role of foreign capital inflows in reducing the disparity between government revenues and costs as well as impellent economic growth has motivated this study to establish the direction of causality between foreign direct investment (FDI), foreign aid, and economic growth in Kenya. By using annual time series data from 1970 to 2020 within bounds testing approach to cointegration and the error correction model ECM-based Granger-causality, the study found a bidirectional causality between foreign aid and economic growth in the short run and a unidirectional causal flow from foreign aid to economic growth in the long run. The results also support evidences of bidirectional causality between FDI and foreign aid in the short run and a unidirectional causal flow from foreign aid to FDI in the long run. However, the study found no causal relationship between FDI and economic growth, irrespective of whether the causality test is conducted in the short run or in the long run. These empirical findings are encouragement to policy makers in Kenya to carefully channel foreign aid in productive sectors to positively influence economic growth and foreign direct investment, as most relevant targets in achieving Vision 2030 and the Sustainable Development Goals (SDGs).

ABSTRACTThe paper empirically examines the extent to which different forms of capital flows (foreign direct investment [FDI], remittances, foreign aid and external debt) affect the impact of trade (exports) on economic growth in Africa. We do this with the aid of an augmented endogenous growth model which we estimate by dynamic system GMM technique with endogeneity-expunging efficiency. First, we find that whilst the direct impact of trade (exports) has been crucial in driving economic growth in Africa in both the short- and long-run, capital flows (FDI, remittances, foreign aid and external debt) do not. Second, our results clearly show that, in both the short- and long-run, inflows of FDI and remittances serve as important channels through which trade (exports) has its largest impact on economic growth while inflows of foreign aid and external debt do not. Following these outcomes, we conclude that policies aimed at attracting FDI and remittances to African countries are what policy reforms should target. Further, our findings suggest that moderating the inflow of external debt and foreign aid could be beneficial to the effect of trade (exports) on economic growth.