Examining the Causal Relationship Between Official Development Assistance, Foreign Direct Investment, and Economic Growth in Selected African Countries

This study focuses on the causal relationship between official development assistance (ODA), foreign direct investment (FDI), and economic growth in selected African countries. Insufficient government funding cannot support all national projects due to limited financial resources. Therefore, the lack of government funding in Africa served as a catalyst for this study. In addition, this study employed the Dumitrescu-Hurlin panel causality test to examine the causal relationship between ODA, FDI, and economic growth for the period 1980 to 2018. Using the Dumitrescu-Hurlin panel causality technique, this study revealed no causal relationship between FDI and economic growth nor between ODA and FDI. Furthermore, the study indicates a bidirectional relationship between ODA and economic growth in Africa. Due to these findings, this paper urges African countries to pay close attention to how ODA is measured as well as the importance of foreign capital inflows (ODA and FDI) in driving economic growth. In turn, this study contributes to the extensive empirical studies of the relationships between ODA, FDI, and economic growth in Africa by shedding light on how policymakers can foster more sustainable growth and stability in Africa.