Foreign Direct Investment Led Growth and Its Determinants in Sub-Saharan African Countries

Despite FDI's growth in Sub-Saharan African (SSA) countries, the evidence from earlier studies on FDI led economic growth and key determinants of FDI in SSA countries have been inconclusive. This paper provides up-to-date evidence on the question: does FDI lead to economic growth? And if so, what are the key determinants of FDI growth in SSA countries? In this study we use three estimation approaches, OLS with robust standard errors (robust regression), multi-level random-effects regression, and fixed-effects regression. The multi-level and fixed-effects regression are aimed to help us control for within-country and between-country effects. Based on a panel dataset for up to 47 SSA countries over the period 1980 to 2011, this thesis identifies the following key results: (1) FDI has a positive, though modest, effect on the growth of the SSA countries, 2) there is a bidirectional relationship between FDI and economic 3) GDP growth, availability of natural resources and openness are important determinates of FDI inflows into the region, 4) except corruption, institutional variables have insignificant effect on the flow of FDI into the region, 5) debt servicing has positive and significant effect on FDI inflows into the region.