, PhD candidate in School of Economics in Southwestern University of Finance and Economics, China
This paper empirically examines the impact of foreign direct investment (FDI) on economic growth in the Republic of Benin. Using the Error Correction Model (ECM), annual time series data the period of 1970-2017 were analyzed employing an ECM technique to determine the short and long-run impact of FDI on economic growth in the Republic of Benin. Granger causality methodology was used to analyze and establish the nature of the relationship (if any) between FDI and economic growth in the Republic of Benin. Our empirical analysis reveals that Foreign Direct Investment (FDI) has both im-mediate and time lag effect on the Republic of Benin economy in the short run. And FDI has a signif-icant but negative effect on the Republic of Benin economy in the long run during the period under review. This was further confirmed by the causality test which shows that FDI granger causes RGDP and not the other way. Thus, FDI has a significant positive effect on the growth as well as the devel-opment of the Nigerian economy only in the long run during the period under review. I therefore con-clude and recommend that government should ensure stable macroeconomic policies as a stabilization tool to propel the attraction of more FDI into the Republic of Benin and dependency on foreign direct investment should remain limited.
Keywords: FDI, economic growth, ECM, Granger causality.
JEL Classification: C22; E22; F14.
Cite as: Marcel, D. T. Am. (2019). Impact of the Foreign Direct Investment on Economic growth on the Re-public of Benin. Financial Markets, Institutions and Risks, 3(2), 69-78. http://doi.org/10.21272/fmir.3(2).69-78.2019.
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