Do foreign financial inflows impact on economic growth? evidence from sub-saharan Africa

Danel Kwabena Twerefou, Festus Ebo Turkson, Belinda Frimpong Wiafe, Samuel Antwi Darkwah

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

The study examines the impact of financial inflows, proxied by Foreign Direct Investment, Official Development Assistance and remittances on Economics growth in Sub-Saharan Africa using the Generalized Method of Moments technique and panel data for 47 Sub Saharan African countries for the period 1995-2017, while controlling for domestic investment, human capital, government expenditure, trade openness, inflation, financial development, political rights and civil liberty. The results indicate that remittances and Foreign Direct Investment are growth-enhancing as they impact positively on economic growth consistent with Solow neoclassical model. However, Official Development Assistance reduces economic growth possibly as a result of weak institutional quality. While government expenditure, domestic investment and inflation positively impact on Economics growth, trade openness and Secondary School Enrolment had a negative impact on growth. We recommend countries in the sub-region to come up with policies that encourage Foreign Direct Investment and remittances inflow while ensuring that institutional structures are improved to ensure the efficiency of Official Development Assistance and the better allocation of such resources. Countries also need to focus more on internal sources of finance for government expenditure.

Original languageEnglish
JournalEstudios de Economia Aplicada
Volume38
Issue number2
DOIs
Publication statusPublished - 2020

Keywords

  • Economic Growth
  • Foreign Direct Investment
  • Official Development Assistance
  • Remittances

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