Nexus Between Foreign Divestment, Financial Development and Economic Growth in African Countries: GMM Approach

This article is one of the first initial investigations to thoroughly examine the relationship between foreign divestment, financial development, and economic growth in African countries, providing empirical evidence to help policymakers align investment strategies and promote stable economic conditions in various African contexts. The objective of this paper is to examine the relationships between foreign divestment, financial development, and economic growth in African countries, emphasising the multifaceted socio-economic factors that affect these interactions. Employing a 2-step difference Generalised Method of Moments (GMM), we examine panel data from 35 African nations over a span of two decades. Data were sourced from the World Bank database, which facilitates a comprehensive analysis of economic indicators such as political stability, exchange rates, and trade openness. The findings demonstrate a negative correlation between foreign divestment and economic growth, while financial development exhibits a positive relationship with foreign divestment. These findings highlight the importance of economic policies that promote financial development while alleviating factors that lead to foreign divestment. Data constraints in specific African countries, especially in areas with limited financial disclosure, can affect the generalisability of the findings. Furthermore, economic and political factors in African countries are prone to instability, which can impact long-term forecast precision.