Foreign direct investment and economic growth in Côte d’Ivoire : An application of the bounds testing approach to cointegration

Figures & data

Figure 1. Evolution of inward FDI flows in Côte d’Ivoire as % of GDP.

Source : The graph has been plotted from the WDI database (WDI, 2021)

Table 1. Foreign direct investment by sectors (as share of total FDI inflows)

Sectors	2012	2013	2014	2015	2016	2017	2014–2017
Agriculture, Forestry and Fishing	0.0	2.2	0.4	0.0	0.9	0.2	0.4
Extractive sector	31.8	0.0	35.6	30.9	38.7	37.7	35.7
Manufacturing	49.7	53.6	27.2	16.9	18.7	10.9	18.4
Electricity, Gas	0.0	6.3	5.0	6.4	1.0	2.4	3.7
Construction	0.0	7.3	2.2	2.8	2.0	2.1	2.3
Water distribution, Sanitation	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Wholesale and Retail	17.7	1.3	4.6	3.8	6.9	1.4	4.2
Transport and Storage	0.0	0.4	4.6	3.4	2.8	3.4	3.5
Hotels, Restaurants	0.0	0.8	0.3	0.3	2.8	4.0	1.8
Communication	0.0	13.7	8.3	17.9	9.9	12.9	12.2
Financing and Assurance	0.1	14.2	11.3	17.4	15.7	24.5	17.2
Real estate and business services	0.3	0.0	0.1	0.1	0.1	0.4	0.2
Others	0.4	0.2	0.5	0.1	0.5	0.0	0.3
Total	100	100	100	100	100	100	100

Source : Adapted from Keho (2020).

Table 2. Description of variables

Variables	Symbols	Description and measure unit	Data source
Income	GDPPC	GDP per capita in current US dollars	WDI (World Bank)
Foreign direct investment	FDI	Net investment inflows as % of GDP	WDI (World Bank)
Trade openness	TO	Sum of imports and exports of goods and services as % of GDP	WDI (World Bank)
Domestic savings	SAVE	Total gross domestic savings as % of GDP	WDI (World Bank)
Education	EDUC	Total secondary enrollment rate as a % of all	WDI (World Bank)
Inflation	INFL	Annual rate of increase of the consumer price index	WDI (World Bank)
Infrastructure	INFR	Lines of telephone per 100 inhabitants	WDI (World Bank)

Table 3. Summary statistics

Variables	Obs	Mean	Std. Dev.	Min	Max	Skewness	Kurtosis
GDPPC	40	1042.299	405.1051	590.3001	2314.051	1.622583	5.400065
GDPPC (ln)	40	6.88975	0.33348	6.38063	7.74675	0.88018	3.16343
FDI	40	1.384226	0.977259	0.176551	6.026777	2.601131	13.76646
TO	40	74.99000	11.20901	55.35000	95.06000	0.149223	2.212992
SAVE	40	19.19175	4.038341	9.179906	27.32870	−0.614587	3.300471
EDUC	40	66.70119	14.39932	45.54529	92.67935	0.470816	2.373916
INFL	40	4.240706	5.020012	−1.106863	26.08157	2.494967	10.53256
INFR	40	1.040484	0.409150	0.466110	1.885800	0.217896	1.910368

Table 4. Pearson’s correlation matrix

Variables	[1]	[2]	[3]	[4]	[5]	[6]	[7]
[1] lnGDPPC	1
[2] FDI	−0.0081	1
[3] TO	0.0314	0.2621	1
[4] SAVE	0.1525	0.2192	0.3678**	1
[5] EDUC	0.7524***	0.2820*	0.1081	0.2639*	1
[6] INFL	−0.3777*	−0.0695	−0.0174	0.2429	−0.3596*	1
[7] INFR	0.2128	0.3800**	0.5381***	0.1116	0.5681***	−0.3421*	1

Note: ***, ** and * indicate the significance level at 1%, 5% and 10% respectively.

Table 5. Results of Toda-Yamamoto causality test

k	dmax	Dependent variables	Explanatory or causal variables (probabilities)
			lnGDPPC	FDI	TO	SAVE	EDUC	INFL	INFR
		lnGDPPC	-	6.46** (0.03)	0.82 (0.66)	0.95 (0.62)	0.38 (0.82)	1.06 (0.58)	8.09*** (0.01)
		FDI	2.81 (0.24)	-	2.75 (0.25)	0.24 (0.88)	0.75 (0.68)	1.95 (0.37)	5.97** (0.05)
		TO	2.69 (0.25)	0.63 (0.72)	-	3.42 (0.18)	0.77 (0.67)	1.01 (0.60)	3.23 (0.19)
4	1	SAVE	2.58 (0.27)	0.45 (0.79)	3.29 (0.19)	-	1.71 (0.42)	2.15 (0.33)	0.34 (0.11)
		EDUC	3.17 (0.20)	7.42** (0.02)	1.56 (0.45)	0.84 (0.65)	-	0.77 (0.67)	5.13* (0.07)
		INFL	3.96 (0.13)	2.88 (0.23)	1.75 (0.41)	4.41* (0.10)	1.67 (0.43)	-	1.04 (0.59)
		INFR	0.79 (0.67)	1.06 (0.58)	5.87** (0.05)	0.36 (0.83)	0.06 (0.96)	0.58 (0.74)	-

(.) : Probabilities (p-value); ***, ** and * indicate the significance level at 1%, 5% and 10% ; values =chi-square statistics; k : the VAR optimal lag (SIC); d_max : maximum order of integration of variables.

Table 6. Results of ADF and PP unit root test (with intercept and trend)

Variable	ADF				PP
	Level		First difference		Level		First difference
	t-stat	p-value	t-stat	p-value	t-stat	p-value	t-stat	p-value
lnGDPPC	−2.3611	0.3930	−5.5572***	0.0003	−2.3433	0.4020	−8.9125***	0.0000
FDI	−3.7806**	0.0284	−9.8914***	0.0000	−3.8699**	0.0231	−10.8582***	0.0000
TO	−1.2607	0.8829	−5.3850***	0.0004	−1.5545	0.7925	−5.3848***	0.0004
SAVE	−3.2754	0.0858	−4.9390***	0.0016	−2.7293	0.2311	−4.8318***	0.0020
EDUC	1.5157	0.9658	−3.2738***	0.0017	1.5157	0.9658	−6.6799***	0.0000
INFL	−4.8858***	0.0017	−6.3308***	0.0000	−4.8374***	0.0019	−12.4059***	0.0000
INFR	−1.4186	0.8396	−7.6267***	0.0000	−1.2257	0.8910	−7.6267***	0.0000

Note: ***, ** and * indicate the significance level at 1%, 5% and 10% respectively.

Table 7. Results of ZA unit root test (with intercept and trend)

Variable	ZA structural break unit root test
	Level		First difference
	t-stat	TB	t-stat	TB
LNGDPPC	−4.9655	2000	−5.7451*	1990
FDI	−3.9321	1993	−12.2786***	1999
TO	−3.1312	2004	−6.3831***	1995
SAVE	−6.0118***	1994	−3.9553	1999
EDUC	−3.7458	2007	−7.9550***	1995
INFL	−5.7022***	1994	5.6403***	1997
INFR	−5.3801	1999	−10.0737***	2004

Note: *** and * indicate the significance level at 1% and 10% and TB is the Time break.

Table 8. Results of lag order selection criteria

Lag	LogL	LR	FPE	AIC	SIC	HQ
0	−521.9766	NA	13664.43	29.38759	29.69550	29.49506
1	−368.1751	239.2469	42.64573	23.56528	26.02853	24.42502
2	−319.1762	57.16534	59.02698	23.56535	28.18394	25.17736
3	−220.5418	76.71562	10.34895	20.80788	27.58182	23.17217
4	−30.93327	73.73667*	0.078294*	12.99629*	21.92558*	16.11285*

*indicates lag order selected by the criterion; LR: Sequential modified LR test statistic (each test at 5% level), FPE: Final prediction error, AIC: Akaike information criterion, SIC: Schwarz information criterion and HQ: Hannan-Quinn information criterion.

Table 9. ARDL bounds test results for cointegration

Model	lnGDPPC=f(FDI, TO, SAVE, EDUC, INFL, INFR)
F-statistics	4.017
Narayan (2005) critical values for k = 6 and sample size  = 40 obs.
level	Lower bounds	Upper bounds
10%	2.353	3.599
5%	2.797	4.211
1%	3.800	5.643

Notes: Critical values are obtained from Narayan (2005) (Table Case III: Unrestricted intercept and no trend, page 1988).

Table 10. Short-run estimates

Independant variables	Dependant variable : $\mathrm{\Delta }$InGDPPC
	Coefficient	p-value
C	1.1989	0.1321
$\mathrm{\Delta }$FDI	−0.0796***	0.0003
$\mathrm{\Delta }$TO	−0.0087***	0.0044
$\mathrm{\Delta }$SAVE	−0.0031	0.5723
$\mathrm{\Delta }$EDUC	−0.0116***	0.0071
$\mathrm{\Delta }$INFL	−0.0035	0.2240
$\mathrm{\Delta }$INFR	−0.1281	0.1152
ECT(−1)	−0.2408***	0.0000
R-suared	0.7673
Adjusted R-squared	0.5475
S.E of regression	0.0846
F-statistics	3.4919***
Prob (F-statistics)		0.00587

Note: *** indicate the significance level at 1%.

Table 11. Long-run estimates

Independant variables	Dependant variable : lnGDPPC
	Coefficient	p-value
C	5.762201***	0.0000
FDI	−0.458685**	0.0383
TO	−0.009884	0.5015
SAVE	0.006176	0.7426
EDUC	0.037527***	0.0002
INFL	0.005930	0.7254
INFR	0.159000	0.6814

Note: *** and ** indicate, respectively, the significance level at 1% and 5%.

Figure 2. Graph of CUSUM.

Figure 3. Graph of CUSUMSQ.

Note: the straight lines represent critical bounds at 5% significance level

Table 12. ARDL model long-run diagnostic tests

Test diagnostic	Tests	p-value
Normality	Jarque-Bera	0.16
Serial correlation	Breusch-Godfrey	0.32
Heteroscedasticity	White ARCH	0.72 0.40
Functional form	Ramsey (Fisher)	0.87

Table

YEARS	GDPPC	FDI	TO	SAVE	EDUC	INFL	INFR
1980	1226,91273	0,93026314	76,18	20,3590869	55,85441	14,7009813	0,46611
1981	973,28405	0,38837422	77,46	18,8312786	51,96774	8,79921083	0,5078
1982	836,655686	0,62732009	75,75	20,2847234	48,08108	7,5831259	0,5375
1983	724,942269	0,54882981	72,68	19,6523146	45,54529	5,64042843	0,5573
1984	696,275231	0,31776013	77,1	25,1714283	49,79809	4,2847611	0,5433
1985	682,573781	0,41790574	79,17	27,3286959	48,18444	1,86380327	0,5767
1986	862,341992	0,7725231	69,69	21,3778707	46,05369	9,68295473	0,5931
1987	915,424017	0,86749612	63,05	16,1269746	46,91011	6,94330627	0,595
1988	897,66606	0,50413594	58,37	15,2483382	52,07291	6,93068617	0,6011
1989	824,158319	0,189497	61,09	11,8820811	53,25971	1,04951824	0,5941
1990	880,01847	0,44863933	58,8	11,267056	50,99581	−0,8058797	0,6103
1991	825,540701	0,17655143	56,99	10,3836298	62,5353	1,6833485	0,6588
1992	847,295846	0,61915199	60,03	9,17990603	56,61473	4,23138383	0,6551
1993	810,832972	1,58570838	55,35	13,3294539	66,67883	2,16471454	0,6794
1994	590,300133	1,41381794	69,84	24,9338666	65,04456	26,081572	0,7521
1995	756,501135	1,92507285	76,2	22,9146953	66,75645	14,2950691	0,8159
1996	809,538737	2,21755762	73,52	20,7947869	65,6524	2,48080669	0,8858
1997	758,911908	6,02677683	78,2	21,6768812	61,16767	4,02083333	0,9415
1998	793,981079	1,90155623	76,36	21,1469349	62,36357	4,6114476	1,09016
1999	759,292203	2,43413044	76,54	19,0371989	61,5112	0,70237581	1,36825
2000	642,254714	1,71363839	74,63	17,0931131	67,47135	2,53077517	1,60216
2001	656,834565	1,0780956	73,55	18,1912098	67,67135	4,36152914	1,7428
2002	710,961168	1,70632555	79,86	20,9696947	67,87135	3,07726485	1,8858
2003	865,789649	2,04227256	75,26	19,3078462	68,07135	3,29680747	1,35228
2004	919,806803	1,96986156	84,6	17,4868675	68,27135	1,45798836	1,4356
2005	931,754287	2,17864454	93,92	17,5380489	68,47135	3,8858304	1,4082
2006	951,947896	1,92566098	95,06	17,5869379	70,72622	2,46719149	1,4432
2007	1065,89637	1,631267	89,43	15,2442829	69,74482	1,89200629	1,2911
2008	1242,43104	1,43912427	87,27	19,026497	68,76342	6,30852769	1,81841
2009	1217,74921	1,18817211	90,77	19,6265102	68,96342	1,01950458	1,40622
2010	1219,7491	1,23280053	93,95	20,742884	69,16342	1,22645612	1,3802
2011	1214,70395	1,30333243	92,15	19,4659358	73,47509	4,91243395	1,3155
2012	1250,80892	1,24240118	93,67	20,2730258	80,72934	1,3045112	1,2822
2013	1423,68228	1,0791502	80,12	23,6460054	87,98359	2,58117037	1,2323
2014	1568,62763	1,20479672	73,64	24,6436416	92,67935	0,44868208	1,07213
2015	1715,10552	1,88999767	71,96	23,5749027	91,97522	1,25149955	1,19411
2016	1493,50606	1,63175831	63,74	20,7389215	91,94192	0,72317846	1,2141
2017	1537,50403	1,80622379	65,7	19,9498673	92,14192	0,68588107	1,2503
2018	2314,05068	1,06932421	63,4	20,426304	92,34192	0,35940903	1,2063
2019	2276,33328	1,72312037	64,55	21,2102851	92,54192	−1,10686344	1,05712

Source: World Development Indicators of World Bank (WDI, 2021).

World Development Iindicators (WDI). (2021). Last Updated 24/05/2021. Indicateurs du développement dans le monde. Banque mondiale Washington.

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