External Financial Flows and Economic Growth in Sub-Saharan African Countries

This thesis examines the factors driving economic growth in sub-Saharan African countries, emphasising the roles of FDI, remittances, foreign aid and human capital. Several econometric approaches were used, including the generalised method of moments (GMM), fixed effects and mixed effects. This thesis addresses the following research questions: Firstly, what is the impact of FDI on economic growth in the SSA region? Secondly, how does human capital impact economic growth? Third, what is the effect of remittances on economic growth and, finally, what is the impact of aid on economic growth in this region of SSA? Data from 2001-2020 are used, covering a sample of 35 SSA countries. This thesis uses panel data econometric methods to account for the heterogeneity of these SSA countries. The relationships between FDI, remittances, human capital and aid are also explored.Chapter two focuses on FDI and reveals a positive and insignificant influence on economic growth under the fixed effect model. However, under the GMM estimation with winsorised data, FDI is found to have a negative and statistically significant effect, with a coefficient of -0.0137. In contrast, trade demonstrates a positive and significant effect when interacting with FDI, with a coefficient of 0.00543, indicating its role as a consistent growth driver in the region.The third chapter examines the impact of human capital on economic growth in 35 sub-Saharan African countries from 2001-2020, using the mixed effect and quartile regression estimation techniques. The chapter concludes that human capital contributes to economic growth, as its indicators are positive and significant. For example, a one-unit increase in secondary school enrolment results in a 0.184% increase in economic growth, while primary school enrolment is associated with a 0.117% increase under the mixed effect model. Chapter four explores the role of remittances in promoting economic growth in the SSA region, with findings indicating a positive and significant impact. Remittances are found to contribute up to 0.794% to growth, emphasising their role as an important financial flow.Finally, Chapter five analyses the relationship between foreign aid and economic growth in Sub-Saharan African countries, utilising panel data from a sample of countries in the region. The results show that foreign aid has a positive and significant impact on economic growth in the region, particularly when the political factor variable is excluded in one of the models, with a coefficient of 1.89%. There has been previous research in this area. However, the results have been inconclusive hence there is a need to settle this debate. Therefore, this thesis is so crucial to add to the existing literature.