FDI and Economic Growth in the East African Community Trade Bloc: Panel Co-integration Evidence
Journal Title: Review of Economics & Finance - Year 2016, Vol 6, Issue 3
Abstract
Policymakers in the East African Community trade bloc have identified FDI attraction and retention among the priority areas for economic growth and development. This study uses annual data of the period 1970-2008 for a panel of the five member states. We employ dynamic GLS with fixed effects and GARCH (1,1) in the analysis. Results show that FDI attraction in the region is positively influenced by size of the economy, financial sector depth, and degree of trade openness; but negatively influenced by macroeconomic and political instability, and high external debt burden. Long term benefits from FDI retention are accentuated by growth in: the stock of human capital, depth of financial sector, ICT infrastructure and export promotion. We show that FDI inflows have a positive effect on the quality of manufactured exports. In addition, FDI inflows in the long run mitigate current account deficit volatility in the region.
Authors and Affiliations
Barnabas Kiiza, Eric Seguya
Keywords
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