Impact of foreign direct investment on export

Abstract

Foreign Direct Investment is a key tool for stimulating economic growth, especially in developing countries where poverty remains a key challenge. As such, there is a need to comprehensively understand the dynamics of this economic tool for better policy recommendations. The overall objective of this research study is to examine the impact of Foreign Direct Investment on Export, a crucial component of economic growth. Specifically, this study intends to explore the causality effect between Foreign Direct Investment and Export. This study explores annual time series data over the period of 1971-2019 from the World bank open data. The study employed Panel Vector Autoregressive (VAR) approach and the Vector Auto Regression (VAR) Granger causality test to analyze the causal relationship between foreign direct investment and export in the ECOWAS region. According to the findings, 1% increase in previous values of FDI for these countries causes the increase in FDI by 0.5 % whilst 1% increase in previous values of export increases FDI by 0.7 %. Likewise, there is an unidirectional causality from export to foreign direct investment