The Global Financial Crisis and Sub-Saharan Africa: The Effects of Slowing Private Capital Inflows on Growth*
Article first published online: 1 SEP 2010
© 2010 The Authors. African Development Review © 2010 African Development Bank
African Development Review
Volume 22, Issue 3, pages 366–377, September/Septembre 2010
How to Cite
Brambila-Macias, J. and Massa, I. (2010), The Global Financial Crisis and Sub-Saharan Africa: The Effects of Slowing Private Capital Inflows on Growth. African Development Review, 22: 366–377. doi: 10.1111/j.1467-8268.2010.00251.x
A previous version of this paper was part of a UK Department for International Development (DFID) funded study at the Overseas Development Institute (ODI) on the effects of the global financial crisis on developing countries. The views presented in this paper are those of the authors and do not necessarily represent the views of the ODI or DFID. The authors would like to thank DFID as well as participants to the 2009 African Economic Conference in Addis Ababa, Ethiopia, and the 2010 ESRC Development Economics Conference in Manchester, UK, for helpful comments and suggestions. The authors are also grateful to an anonymous referee for valuable comments on an earlier version of this paper.
- Issue published online: 1 SEP 2010
- Article first published online: 1 SEP 2010
Abstract: This paper uses the bias-corrected least-squares dummy variable (LSDV) estimator to examine the relationship between economic growth and four different types of private capital inflows (cross-border bank lending, foreign direct investment (FDI), bonds flows and portfolio equity flows) on a sample of 15 selected sub-Saharan African countries over the period 1980–2008. Our results show that FDI and cross-border bank lending exert a significant and positive impact on sub-Saharan Africa's growth, whereas portfolio equity flows and bonds flows have no growth impact. Our estimates suggest that a drop by 10 per cent in FDI inflows may lead to a 3 per cent decrease of income per capita growth in sub-Saharan Africa, and a 10 per cent decrease in cross-border bank lending may reduce growth by up to 1.5 per cent. Therefore, the global financial crisis is likely to have an important effect on sub-Saharan Africa's growth through the private capital inflows channel.