Dynamic Stochastic Panel Analysis of FDI Inflows, Employment Generation and Poverty Reduction in Some Selected ECOWAS Countries

Abstract

Abstract Background and aim: Foreign direct investment (FDI) has historically played a vital contribution in promoting the economic growth and development in many undeveloped countries by creating jobs opportunities and facilitating technology transfer. However, over the past decade, the ECOWAS region has experienced a steady decline in FDI inflows, resulting in a shortfall in investment needed for initiatives aimed at enhancing employment. In light of this, the study explores the dynamic stochastic interactions between reduction in poverty, employment provision and foreign direct investment inflows among ECOWAS subregion. The study draws on data from 1990-2021. The research employs the impulse response analysis and variance decomposition techniques. The study revealed that there is a strong relationship and interaction between FDI, employment, and poverty reduction, highlighting the significant impact of FDI on job creation and poverty alleviation in the ECOWAS region. Policy makers need to consider the inherent time lags in these processes to ensure that policies are appropriately timed when the goals are to generate employment and reduce poverty.