Foreign Capital Inflow and Economic Growth: Comparative Evidence from Africa Anglophone and Francophone Countries

Abstract

This study ascertained the influence of foreign capital inflow on Anglophone and Francophone country's economic growth in Africa. Foreign capital components of Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Foreign Debt Stock (FDS), Personal Remittance (PRT) and Official Development Assistance (ODA) were used as explanatory variables and economic growth proxy by changes in RGDP. Ten (10) African countries were selected from 1981 to 2022. Initial tests were carried out, and the panel random effect estimation as selected by the Hausman test was used. The findings show specifically that: FDI and FPI have a negative influence on economic growth in both blocks in Africa. However, only the effect of FDI in Francophone countries was significant. Thus, concluded that other foreign capital components of FDS, PRT and ODA contributed more to economic growth in countries in both blocks in Africa during the period under consideration.

Keywords: Foreign capital, Economic growth, Anglophone, Francophone, Hausman test, Panel regression