On the causal nexus between FDI and globalization: evidence from Africa

Abstract

We pioneer empirical investigation into the causal relationship between foreign direct investment (FDI) and globalization in Africa with the aid of the Dumitresu-Hurlin panel Granger causality test. Using a panel dataset of 50 countries for the period 1996–2016, we find evidence of unidirectional causality from globalization to FDI. Considering the dimensions of globalization, we find evidence of unidirectional causality from social and political globalization to FDI while, in the case of economic globalization, the direction of causality moves from FDI. However, at the country level, there are substantial variations in terms of the causal relations. Thus, making policies regarding FDI–globalization should be treated with caution as one–size–does–not–fit all given the differential causal nexuses in Africa.