Domestic investment, external debt and economic growth: Cointegration and causality evidence from Nigeria

  • Ibrahim Mohammed Adamu Faculty of Economics and Administration, University of Malaya, Malaysia
  • Rajah Rasiah Faculty of Economics and Administration, University of Malaya, Malaysia
Keywords: Domestic investment, External debt, FDI, Economic growth

Abstract

This paper investigates the causal relationship between domestic investment, external debt and economic growth in Nigeria from 1970 to 2013. In doing so, we use the Bayer and Hanck, cointegration test and Granger causality tests, which is augmented with a lagged error correction term. The results reveal a unique and stable cointegrating relationship among the candidate variables. The results also show bidirectional causality flows among domestic investment, external debt, foreign direct investment and economic growth. In addition, the results demonstrate a unidirectional causality running from external debt to economic growth, and economic growth to domestic investment. Taken together, the results show that all the four variables have a complementarity relationship with one another, and influence economic growth in Nigeria.

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Published
2017-09-06
How to Cite
Mohammed Adamu, I., & Rasiah, R. (2017). Domestic investment, external debt and economic growth: Cointegration and causality evidence from Nigeria. Journal of Contemporary Issues and Thought, 7, 1-9. https://doi.org/10.37134/jcit.vol7.1.2017