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Article
Publication date: 31 January 2020

Friday Osemenshan Anetor

This study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between the…

464

Abstract

Purpose

This study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between the periods 1995 and 2017.

Design/methodology/approach

The study used a secondary source of data obtained from the world development indicator (WDI) and used the system generalized method of moments (SGMM) and dynamic panel threshold regression to analyze the data.

Findings

The study found that foreign direct investment has a negative and significant impact on the economic growth of SSA. The study also found that portfolio investment has a positive impact on economic growth but it is statistically insignificant. However, when portfolio investment interacted with financial development, it became positive and statistically significant presupposing that financial development is a necessary condition for portfolio investment to exert impact on economic growth. Further, the study showed that the interaction of foreign direct investment with financial development has a negative and significant effect on economic growth. Finally, the study found the minimum threshold of financial development at 42.66 per cent.

Practical implications

Policymakers in SSA should be cautious and critical in the kind of foreign direct investment they attract as the open door policy to attract all kinds of foreign direct investment would not bring about the desired result. Also, policymakers in the region should develop and implement policies that would deepen and strengthen the financial system to foster the development of the country’s financial sector and accelerate economic growth.

Originality/value

The contribution of the study lies in establishing a minimum threshold of financial development; thus, providing a clear-cut direction for policymakers in SSA countries in their pursuit of financial development and economic growth.

Details

International Journal of Development Issues, vol. 19 no. 1
Type: Research Article
ISSN: 1446-8956

Keywords

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Article
Publication date: 4 June 2020

Friday Osemenshan Anetor

The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in…

537

Abstract

Purpose

The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017.

Design/methodology/approach

This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data.

Findings

This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%.

Practical implications

It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI.

Originality/value

The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

Details

International Journal of Development Issues, vol. 19 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

Available. Open Access. Open Access
Article
Publication date: 2 September 2019

Friday Osemenshan Anetor

The purpose of this paper is to examine the effect of shocks in the various components of private capital inflows on economic growth in Nigeria using quarterly data in the period…

2524

Abstract

Purpose

The purpose of this paper is to examine the effect of shocks in the various components of private capital inflows on economic growth in Nigeria using quarterly data in the period 1986Q1–2016Q4.

Design/methodology/approach

The study employs the impulse response function and the forecast error variance decomposition of the structural vector autoregression (SVAR) model.

Findings

The research result shows that shocks in foreign direct investment (FDI) inflows and portfolio investment inflows have a positive and significant impact on economic growth in Nigeria. In addition, FDIs accounted for significant variation in the growth of the Nigerian economy followed by portfolio investments, while personal remittances exerted the least variation in growth.

Practical implications

The government should promote a favorable macroeconomic environment for existing and potential foreign investors to ensure the continued inflows of FDI and portfolio investment.

Originality/value

The novelty of this study lies in disaggregating private capital inflows and analyzing the effect of the shock of each component on the growth of the Nigerian economy using SVAR.

Details

Journal of Economics and Development, vol. 21 no. 1
Type: Research Article
ISSN: 2632-5330

Keywords

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