The Impact of Foreign Direct Investment on Economic Growth in the Economic Community of West African States

Abstract

The main objective of this study is to determine the impact of Foreign Direct Investment (FDI) on the economic growth of the countries of the Economic Community of West African States (ECOWAS). The study utilised the fixed effects model to estimate regression coefficients of all ECOWAS countries between 2000 and 2009. The FDI-income ratio, exports and human capital were found to be positively related to economic growth. An important policy recommendation is that ECOWAS countries should provide adequate legal and institutional frameworks to protect foreign investors, improve governance, and ratchet up investment incentives to boost FDI inflows and accelerate economic growth.

Keywords: Foreign direct investment; Economic growth; Fixed effects model; ECOWAS

JEL classification: E22, F21, F43, C33, C32