Title: Resource gaps, foreign capital flows and economic growth in Sudan: an empirical econometric analysis

Authors: Elwasila S.E. Mohamed

Addresses: Department of Economics, University of Khartoum, P.O. Box 321, Khartoum 11115, Sudan

Abstract: The objective of this study is to investigate the contribution of foreign capital inflows in abridging the resource gaps and to economic growth of Sudan over the period 1978-2015. Existence of a long run relationship among economic growth, resource gaps and foreign capital inflows is established by the method of Johansen cointegration. The VECM shows that economic growth is significantly and positively affected by foreign aid and current account deficit but negatively affected by government budget deficit (GBG), foreign resource gap (FGR) and foreign direct investment (FDI) particularly in the long run. The study finds unidirectional causal relationship running from investment-savings gap to GDP as well as from GBG to GDP, with no feedbacks from both gaps to GDP. There is a unidirectional causality running from GDP to FRG but encountered with a unidirectional causality running from FDI to GDP. Bidirectional causality exists between GDP and current account deficit. Recommendations are provided accordingly.

Keywords: resource gaps; foreign direct investment; current account; cointegration; vector error correction; Granger causality; Sudan.

DOI: 10.1504/AJESD.2017.094878

African Journal of Economic and Sustainable Development, 2017 Vol.6 No.4, pp.292 - 316

Received: 13 Mar 2018
Accepted: 04 Jun 2018
Published online: 25 Sep 2018 *

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