Foreign Direct Investment and Economic Growth in Cote D’Ivoire: A Time Series Analysis

Abstract

This paper investigates the impact of foreign direct investment (FDI) inflows on economic growth in Cote D’Ivoire during the 1975-2011 period. The selection of this African nation is motivated by the rapid inflows it has experienced over the past decade. Using unit root and cointegration analysis, the resulting error correction model (ECM) suggests that gross fixed capital formation (GFCF) has a short-run positive impact on economic growth, while FDI, the repatriation of net income abroad, and periods involving structural breaks, have a negative effect on economic growth in Cote D’Ivoire. In addition, the negative error correction term indicates that deviations from long-run per capita growth during the current year are corrected relatively quickly in the following year, ceteris paribus. The unexpected negative effect of FDI on economic growth may be due to the significant repatriation of profits and dividends the country has experienced in recent years.