Cross-border bank lending versus FDI in Africa’s growth story

J. B. Marcias

For most of the large African economies that have undertaken financial sector reforms since the early 1980s, the two main types of private capital inflows are FDI and cross-border bank lending. This paper investigates the relative long-run impact of each of these inflows on economic growth in African countries. In addition to controlling for some factors (e.g. financial sector reforms and trade openness), the paper seeks to investigate the outcomes for three groups of African economies. They are:

  • The SANE (South Africa, Algeria, Nigeria and Egypt) economies, which arguably are the dynamos of growth in Africa;
  • Natural resource countries, which includes some of the SANE; and
  • The rest of the countries not covered in the above two categories.

Documents