DIRECT INVESTMENT AND ECONOMIC GROWTH: EVIDENCE FROM ECOWAS SUB-REGION

Abstract

This paper investigates the impact of foreign direct investment (FDI) on economic growth in Economic Community of West African States (ECOWAS) sub-region, using fixed effects and random effects models. The dataset analyzed stretched from 2007 to 2016 and were collected from the World Bank and UNCTAD archives. The empirical results reveal that foreign direct investment (FDI) is positively related to the growth rate of gross domestic product (GRGDP). Additionally, the coefficient of foreign direct investment (FDI) is invariably highly significant, passing the significance test at the 1 percent confidence level. Therefore, the hypothesis of a significant positive relationship between foreign direct investment (FDI) and economic growth in ECOWAS sub-region is validated. The study recommends that the Heads of states and governments of the ECOWAS sub-region are to formulate macroeconomic and political policies capable of attracting foreign direct investment to the region to bridge the gap between domestic savings and investment level needed for the regional economy to strive.