Abstract
The study examines the relationship between private capital inflows (foreign direct investment and remittances), institutions and economic growth in a panel of 45 African countries from 2002 to 2018. Using the system generalized method of moments (SGMM), the study found that foreign direct investment inflows (FDI) have a significant and positive impact on economic growth in Africa. However, remittances exert no significant impact on economic growth. The study further analyzed the moderating role of institutions in the relationship between private capital inflows and economic growth by examining the impact of the interactions between private capital inflows and institutions on economic growth. The study concluded that the coefficient(s) of the interplay between FDI and institutional variables is negative and statistically significant presupposing that institutions in Africa do not complement FDI inflows in driving economic growth. In the same vein, the coefficient of the interactive variables between remittances and institutions (regulatory requirement) is negative and significant indicating that remittances and institutions are substitutes rather than complements. The implication of the study, therefore, lies in the fact that institutions in Africa are weak and as a result cannot play a supportive role in reaping the positive spillovers of private capital flows to Africa.
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No potential conflict of interest was reported by the author(s).
Additional information
Notes on contributors
Friday Osemenshan Anetor
Dr. Friday Anetor is a lecturer in the Department of Economics, Pan-Atlantic University, Lagos, Nigeria. He specializes in International Economics and Quantitative Economics. He has several publications in reputable journals.
Simeon Oludiran Akinleye
Simeon Oludiran Akinleye is a Professor in the Department of Economics, University of Lagos. He has over two decades teaching and research experience. He has written and consulted widely on trade and development economics.
Folorunso Sunday Ayadi
Folorunso Ayadi is currently an Associate Professor in the Department of Economics (majoring in Environmental and Resource Economics) at the University of Lagos, Nigeria.