The impact of foreign capital inflows on economic growth in selected West African countries

The West African countries have been identified with inadequate capital for investment, being one of the poorest sub-regions in the world. This study employed panel data from 1980 to 2013 to examine the impact of foreign capital inflows on the economic growth in the selected West African countries using Two Gap Theory. The objective of this study is to examine the nature of relationship between foreign capital inflows and the level of economic growth selected West African Countries and to observe the causality between foreign capital inflows components and economic growth. The study adopts Pedroni cointegration and granger causality test. The result shows the existence of long run relationship between foreign capital inflows and economics growth in selected West African country. All the variables were positive but only foreign direct investment is significant. Net migrant remittance, foreign direct investment and official development assistance cause growth in the short run. The study recommends policies to encourage capital inflows via macroeconomic management, a flexible exchange rate, financial sector supervision, large reserves and diversification of domestic economies