Does infrastructural absorptive capacity stimulate FDI-growth nexus in ECOWAS

摘要

The study assesses the relevance of infrastructural absorptive capacity in the foreign direct investment (FDI)-growth argument in ECOWAS. Though foreign aid has received a vast attention in the literature, however, an assessment of how the infrastructural readiness of the host economies drives the effectiveness of aid was vocal in this re-examination. The study assesses this main thrust in ECOWAS Sub-region for the period 1995–2017 using the system GMM estimation approach. The result suggests that FDI promotes growth though growth responded less proportionately to FDI influx. Alternatively, following the interaction of FDI and physical infrastructures, the responsiveness of FDI declined. Specifically, the responsiveness of GDP growth declined from 29.2% to 0.21% for road infrastructures. It hence becomes expedient for African government and policy makers to channel a viable development path towards enhancing transport and road infrastructures in order to attract financing into the space and the livelihood of poor rural population.