Volume 20 No 13 (2022)
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GROWTH AND CAUSALITY BETWEEN FDI AND GDP: AN EMPIRICAL STUDY IN AFRICA
Dr. P Surya Kumar, Dr. Abdurhman Kedir Ali
Abstract
FDI flows to Africa reached $83 billion a record level in 2021, from $39 billion in 2020, due to a
large corporate reconfiguration in South Africa. Global FDI flows in 2021 were $1.58 trillion, up 64 per cent
from the level during the first year of the COVID-19 pandemic of less than $1 trillion. During 1994-2020,
Africa, FDI growth was registered about 1.64 per cent per annum and significant at 1 per cent level. In
Africa, all the regions having positive growth rate and statistically significant at 5 per cent level. In this
paper, employ Johansen co-integration as well as Granger Causality test’ for FDI and GDP during 1994-
2020, before examining these two tests we used Augmented Dickey-Fuller (ADF) test for the stationarity.
From the ADF test, the tests were carried out for the series LnFDI and LnGDP. The results shows that
LnFDI, and LnGDP are non-stationary at level, but the first difference appropriate significant level.
Johansen Co-integration test results reveals; FDI and GDP have long run Co-integration in the entire
Africa continent, Central and North Africa regions, remaining, there is no co-integration is accepted. From
the Granger causality test results indicates Africa and Southern Africa region, LNGDP is LNFDI granger
reason, and also LNFDI is LNGDP granger reason, which indicates that there is direct Granger causality
relationship between total Africa continent FDI & GDP and also GDP & FDI. In western Africa region, there
is direct Granger causality relationship between GDP and FDI, but there is no Direct Granger causality
relationship between FDI and GDP
Keywords
Africa, FDI, GDP, Growth, Stationary, Co-integration, Causality test.
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