The impact of foreign direct investment on Namibia’s economic growth: A time series investigation

Abstract

The current study investigates the impact of foreign direct investment on the growth of Namibia’s economy from 1990 to 2020 using the ARDL cointegration method. The results reveal that FDI, the interactive variable of FDI and trade openness, and other macroeconomic variables such as domestic investment, government consumption expenditure, human capital, a proxy for economic stability, and return on investment are responsible for Namibia’s economic growth. The article confirms the FDI-led growth and the Bhagwati hypotheses for Namibia as shown by the FDI and the interactive variable of FDI and trade openness, respectively. To reap the full benefits of FDI on economic growth in Namibia, the government must focus on improving physical infrastructure and the quality of human resources. It should also facilitate the development of an entrepreneurship culture, create a stable macroeconomic environment, and improve conditions for productive investments to accelerate economic growth and development.

Keywords:

• Economic growth
• foreign direct investment
• trade openness
• human capital
• return on investment
• government consumption expenditure cointegration
• cointegration
• inflation
• ARDL

JEG classification:

• C32
• C87
• E22
• F21
• F43

Disclosure statement

No potential conflict of interest was reported by the author.

Data availability statement

The data used in the study is accessible through the following provided link: https://data.mendeley.com/datasets/j6d6j2bb6c/1.

Additional information

Notes on contributors

Tafirenyika Sunde

Tafirenyika Sunde is an Associate Professor at the Namibia University of Science and Technology (NUST), formerly known as the Polytechnic of Namibia. He also serves as an Extraordinary Associate Professor at South Africa’s North-West University (NWU). Prior to joining the then Polytechnic of Namibia in 2008, he worked as a Teaching Assistant at the University of Zimbabwe (UZ) and as a Lecturer at the Midlands State University (MSU). His research interests include macroeconomics, energy economics, econometrics, and public policy. Sunde has published several research articles in peer-reviewed local and international journals. This article on the influence of FDI on economic growth belongs to the macroeconomics genre. He holds a DLitt et Phil in Economics from the University of South Africa and an MSc and a BSc from the University of Zimbabwe.The article investigated the impact of FDI on economic growth in Namibia. This is a fascinating topic to researchers and the country as the study tries to illustrate the importance of attracting FDI to a developing country that does not have enough resources to fund investment domestically. It is known that a country that can invest either through domestic or foreign capital is likely to create the desperately needed jobs in most developing countries and grow the economy and hence the country’s GDP. The study results indicate that FDI is significant in explaining economic growth in Namibia. Additionally, the other control variables that were included in the model were also found to positively influence economic growth in Namibia, which suggests that besides FDI, some other variables are important in explaining economic growth.