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Foreign Capital Flows and Economic Development in Africa pp 163–190Cite as

Palgrave Macmillan

Cross-Border Capital Flows and Economic Performance in Africa: A Sectoral Analysis

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Abstract

We argue that cross-border capital flows can provide relief for African countries’ pervasive and extraordinarily high financial constraint, if properly harnessed by matching differential flows—foreign direct investment, foreign portfolio investment and remittances—with the production sectors that they are most suited for. Guided by the economics that underpin this productive matching, we used difference GMM to estimate the postulated relationship between cross-border capital flows and sectoral value-added growths. We find that, indeed, certain flows aid growth in some sectors while retarding or not affecting growth in other sectors. Therefore, African countries can use cross-border capital flows strategically to relieve their financial constraint and, consequently, enable economic growth and development.

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Authors and Affiliations

  1. University of the Witwatersrand, Johannesburg, South Africa

    Odongo Kodongo & Kalu Ojah

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  1. Odongo Kodongo
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  2. Kalu Ojah
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Editors and Affiliations

  1. Pennsylvania State University, DuBois, PA, USA

    Evelyn Wamboye

  2. Birmingham-Southern College, Birmingham, Alabama, USA

    Esubalew Alehegn Tiruneh

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Kodongo, O., Ojah, K. (2017). Cross-Border Capital Flows and Economic Performance in Africa: A Sectoral Analysis. In: Wamboye, E., Tiruneh, E. (eds) Foreign Capital Flows and Economic Development in Africa. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53496-5_8

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  • DOI: https://doi.org/10.1057/978-1-137-53496-5_8

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  • Publisher Name: Palgrave Macmillan, New York

  • Print ISBN: 978-1-137-53495-8

  • Online ISBN: 978-1-137-53496-5

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