The Interactive Effect of Foreign Direct Investment (fdi) and Remittances on the Economic Growth in Selected Sub-Saharan Africa (ssa) Countries

This study investigated the interactive effect of Foreign Direct Investment (FDI) and remittances on economic growth in ten selected Sub-Saharan African (SSA) countries from 1993 to 2024. The research aimed to examine the relationship and interactive effects of FDI and remittance inflows on economic growth and to investigate the causal effect among the variables. The study used an econometric growth model based on the Solow-Swan Growth Model and employed a Pooled Mean Group (PMG) estimator within an ARDL framework to analyze panel data. The key variables included real GDP per capita growth, FDI inflows, remittance inflows, inflation rate, and human capital. The results indicate that inflation is a leading indicator for GDP, highlighting the critical role of price stability. The analysis also confirmed the long-run interconnectedness of capital inflows and economic performance. However, the interaction term between FDI and remittances was not found to be statistically significant. While Granger causality tests did not show a systematic short-term predictive link from FDI and remittances to GDP growth, their long-run significance was confirmed within the ARDL model, underscoring their vital role in supporting economic development over longer horizons. The study concluded that to maximize the benefits of external capital inflows, SSA countries must implement targeted, country-specific policy frameworks that strengthen institutions and ensure macroeconomic stability. The findings offer valuable insights for policymakers to design strategies that leverage the complementarities between FDI and remittances to foster sustainable economic development.