Does Foreign Direct Investment Crowd-Out Domestic Private Investment in Sub-Saharan Africa?
) (Makerere University) Abstract This study investigates the impact of FDI on domestic private investment, specifically whether FDI has positive spill-over effects (crowding-in) or negative spill-over effects (crowding-out) on domestic private investment. The study uses a flexible accelerator investment model, which was modified specifically with regard to data availability to capture some of the institutional and structural characteristics of developing countries particularly the Sub-Saharan Africa (SSA) nations and also to include FDI as one of the explanatory variables. In addition to the standard panel models (i.e. fixed effects, between effects and random effects regressions), 2SLS econometric technique was used to account for the simultaneity bias between private investment and public investment, which would otherwise lead to inconsistency of parameter estimates. The Hausman (1978) specification test was then used to check for the preferable model. The study uses data collected o
