Journal Article

Openness, Investment and Growth in Sub-Saharan Africa

Hector Sala and Pedro Trivín

in Journal of African Economies

Volume 23, issue 2, pages 257-289
Published in print March 2014 | ISSN: 0963-8024
Published online January 2014 | e-ISSN: 1464-3723 | DOI: https://dx.doi.org/10.1093/jae/ejt027
Openness, Investment and Growth in Sub-Saharan Africa

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  • Macroeconomic Aspects of International Trade and Finance
  • Economywide Country Studies
  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • Economic Growth and Aggregate Productivity

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This paper revisits the determinants of economic growth in Sub-Saharan Africa by looking at conditional and unconditional convergence, and by focusing on the growth incidence of globalisation, domestic investment (DI), and foreign direct investment (FDI). We use annual time-series to estimate dynamic panel data models that exploit all sample information (i.e., we do not only use 5-year averages as is standard in the literature). We find the rate of conditional convergence to be around 4%, and the growth impact of FDI and DI to be greater the greater is the change in the degree of economic openness. We also find a net crowding out effect between both types of capital so that larger amounts of FDI reduce the impact of DI on economic growth (and vice versa). These results are obtained through the estimation of multiplicative interaction models which allows us to evaluate the interactions between changes in openness, DI and the net flows of FDI. This constitutes a novelty in the appraisal of the globalisation and investment impact on economic growth.

Keywords: O55; O47; F43; E22

Journal Article.  9973 words.  Illustrated.

Subjects: Macroeconomic Aspects of International Trade and Finance ; Economywide Country Studies ; Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Economic Growth and Aggregate Productivity

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