Foreign direct investment and domestic private investment in Sub-Saharan African countries: crowding-in or out?

Askandarou Diallo (1) , Luc Jacolin (2) , Isabelle Rabaud (1)

1 LEO - Laboratoire d'Économie d'Orleans
2 Banque de France - Banque de France

With a fall of 42% of Foreign Direct investment (FDI) flows worldwide in 2020, the Covid-19 crisis has raised important concerns about the impact of this source of financing on economic growth in Africa, in particular through its effect on national investment. While FDI is often seen as a welcome boost to economic growth and long run development, its net effect may depend critically on whether it stimulates domestic private investment or crowds it out and over what time horizon. This paper investigates the relationship between FDI and private investment in Sub-Saharan Africa (SSA), using a sample of 40 countries over 1980-2017. To disentangle short term from long-term dynamics, our empirical analysis is based on Pooled Mean Group (PMG), Mean Group (MG) and Dynamic Full Effects (DFE).

Mots clés: Financial development; Domestic investment; Foreign direct Investment; Crowding-in/crowding-out effects

Domaines: Economies et finances

Askandarou Diallo, Luc Jacolin, Isabelle Rabaud. Foreign direct investment and domestic private investment in Sub-Saharan African countries: crowding-in or out?. 2021. ⟨hal-03259551⟩