The Effect of Foreign Direct Investment and Trade Openness on Economic Growth: Evidence from Five African Countries

Haggai Chibale ChibalamulaYeboah EvansMukuka KacheloDastan Bamwesigye

DOI 10.7160/aol.2023.150103
No 1/2023, January
pp. 35-46

Chibalamula, H. Ch., Evans, Y., Kachelo, M. and Bamwesigye, D. (2023) "The Effect of Foreign Direct Investment and Trade Openness on Economic Growth: Evidence from Five African Countries", AGRIS on-line Papers in Economics and Informatics, Vol. 15, No. 1, pp. 35-46. ISSN 1804-1930. DOI 10.7160/aol.2023.150103.

Abstract

Through some empirical studies, the flow of FDI and trade openness have proven to support economic growth in developing countries. This paper examines the significance of FDI and trade openness in five African countries (Ghana, Morocco, Kenya, Uganda, and Zambia). The study employed the panel data analysis method using data from the World Bank for the period 1994-2019 for the five selected countries. The result from the Random effect model indicated that FDI positively supports growth, whereas trade openness harms economic growth in these countries. The outcome further revealed that Uganda enjoys more significance than the other countries using the countries' dummies through the pooled model estimation. We recommend that various governments focus more on exports, reduce imports, attract more FDI through incentives, and create a regulatory environment that is friendly to FDI.

Keywords

GDP, FDI, Trade openness, Economic growth, Africa.

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