Towards Economic Resilience in Africa: The Complementary Roles of Economic Complexity and Foreign Direct Investment

Abstract

This study focuses on two key objectives: first, to evaluate the unconditional effect of foreign direct investment (FDI) on economic resilience in Africa and, second, to investigate the relevance of economic complexity in shaping the FDI–economic resilience nexus. The analysis is based on a panel of 34 African countries covering the years 2011–2023, employing the dynamic system generalised method of moments (GMM) and the bias-corrected method of moments (BCMM) as the two dynamic estimation techniques for the study. While the dynamic system GMM served as the baseline estimator, the BCMM was employed as a robustness check in response to recent concerns regarding the reliability of system GMM. The BCMM approach robustly addresses and corrects for endogeneity, cross-sectional dependence and heterogeneity. In this study, economic resilience is defined by macroeconomic stability, market efficiency and governance. The findings reveal a positive synergy between FDI and economic resilience, with economic complexity further amplifying the positive impact of FDI on economic resilience. In light of these findings, the study advances policy recommendations that align with both the African Union's Agenda 2063 and the United Nations Sustainable Development Goals (SDGs).