Volume 9, Issue 1, June 2020, Page: 1-9
The Nexus Between Income and Foreign Direct Investment: Evidence from the Gambia
Alfusainey Touray, College of Management & Information Technology, American International University, Banjul, The Gambia; Gambia Investment and Export Promotion Agency (GIEPA), Serrekunda, The Gambia; Institute of Social Sciences, Department of Economics, Marmara University, Istanbul, Turkey
Received: Jun. 24, 2019;       Accepted: Sep. 9, 2019;       Published: Jan. 4, 2020
DOI: 10.11648/j.jwer.20200901.11      View  434      Downloads  113
The purpose of this study is to empirically examine the dynamic impact of the stock of foreign direct investment (FDI) inflows on the aggregate income of The Gambia. In order to find the dynamic nexus, the ARDL model was used to capture both short-run and the long-run impact of FDI inflows. The result shows that FDI has a negative impact on income in the short-run. The bounds testing for cointegration showed that there is a long-run level relationship between income and FDI inflows, and the impact of FDI inflows on income in the long-run is positive. In order to examine the possible reason why FDI inflows have a different impact in the short-run and the long-run, the study empirically investigates how the interaction of FDI inflows and domestic investment affects income. The results showed that in the short-run FDI inflows crowded-out domestic investment and this led to FDI inflows to have a negative impact on income in the short-run. Moreover, the results also showed that in the long-run the FDI inflows complemented domestic investment and this led to FDI inflows to have a positive impact on aggregate income in the long-run. The conclusion drawn from this study is that the net impact of FDI inflows on the aggregate income of The Gambia depends on the degree of complementarity and substitution between FDI inflows and domestic investment.
Foreign Direct Investment, ARDL, Bounds Testing, Cointegration, Aggregate Income, The Gambia
To cite this article
Alfusainey Touray, The Nexus Between Income and Foreign Direct Investment: Evidence from the Gambia, Journal of World Economic Research. Vol. 9, No. 1, 2020, pp. 1-9. doi: 10.11648/j.jwer.20200901.11
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