Complementary relationship between foreign direct investment, financial development threshold and economic growth: evidence from Sub-Saharan Africa
The purpose of this paper is to determine the mediating effect of financial development in foreign direct investment (FDI) and the link of growth and to establish the threshold of financial development in 24 sub-Saharan African countries over the period 1995-2022. This paper found that FDI and the d...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2025-06-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1832.pdf
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| Summary: | The purpose of this paper is to determine the mediating effect of financial development in
foreign direct investment (FDI) and the link of growth and to establish the threshold of financial
development in 24 sub-Saharan African countries over the period 1995-2022. This paper found that
FDI and the development of the financial system have no significant impact on economic growth in
sub-Saharan Africa. However, when the interactive term foreign direct investment and financial
development was introduced into the model, the effect of foreign direct investment on economic
growth became positive and significant, while the coefficient of the interaction term was negative
and significant. This implies that the sub-Saharan Africa does not have a sufficient financial system
to effectively allocate external resources. As a result, this study used the TR to determine the
minimum level of private sector credit as a percentage of GDP, which sets a threshold of 79.32. |
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| ISSN: | 1841-8678 1844-0029 |