Foreign Direct Investment (FDI) and Economic Growth in East African Countries

Abstract

This paper investigates the Impact of Foreign Direct Investment (FDI) on Economic Growth of East African Countries. We apply Fully Modified Ordinary Least Square (FMOLS) technique for the data from 4 East African Community Member Countries (Kenya, Rwanda, Uganda and United Republic of Tanzania) covering the period 1990 to 2015 to examine the long term coefficients after confirmation the existence of panel cointegration. We find foreign direct investment (FDI) accelerates positive impact on economic growth in most of east African countries with significant results at 10 percent level of significance. We suggest that the East African countries region should remain their economies open to attract more potential investors to invest in sectors that promote the economy in order to achieve the desired objectives.

Keywords: Foreign Direct Investment, Economic growth, FMOLS, East African countries.