Abstract

This study aims to empirically investigate the effects of external debt, foreign direct investment, and official development assistance on economic growth within a theoretical framework. It has long been debated in the literature that developing countries can close the capital gap—arising from insufficient saving capacity—through external resources, thereby enhancing economic growth via investments. A panel data analysis was conducted using data from 10 African countries for the period 2000–2022. The long-term cointegration relationship among the variables in the model was tested using the Westerlund method, while long-term coefficients were estimated using Pesaran’s CCEMG and Eberhardt’s AMG methods. The findings indicate a long-term cointegration relationship between the dependent and explanatory variables. According to the estimation results, external debt and official development assistance have a significant and negative effect on economic growth. Although the coefficient for foreign direct investment is positive, it is not statistically significant. The effect of public investment, used as a control variable, was found to be positive and significant. This study contributes to the literature by empirically revealing the impacts of external financing instruments on economic growth within the context of African countries. For these nations, the findings suggest that the potential adverse effects of external debt and official development assistance should be taken into account when planning growth strategies.

Key words: External debt, foreign direct investment, official development assistance, panel cointegration, Africa. JEL Codes: O11, F35, C23.

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