FOREIGN DIRECT INVESTMENT, STANDARD OF LIVING AND ECONOMIC GROWTH OF AN EMERGING ECONOMY

Abstract

In recent times, the conventional roles of governments have been to ensure that citizens abide with rule and regulations and to provide social welfare. Government has to embark on investment to enable it sustain this role. Government directly or indirectly advances the output of the private sector by resourceful distribution of limited resources. In acknowledgement of these roles, lots of governments the world over today ascribes prodigious significance to the classical performance of their economy by embarking on monetary strategies that will attract foreign investors. To this end, this research seeks to ascertain the causation among standard of living, economic growth and foreign direct investment of selected an emerging country. This study used the Nigerian data- which is a typical representative of an emerging economy. The study employed pairwise granger, VECM to the Long run association amidst the variables. It also adopted the Error adjustment model to exam for the speed of adjustment of the GDP function and finally stability and diagnostic tests were performed. The results show that there is a unidirectional causality between foreign direct investments while it showed bidirectional causation exists between FDI and standard of living in the long-run. The critical analyses of the causality among aforementioned variables under military rule and under democratic rule constitute the major contribution of this study to existing. This study recommended first, that policy makers should concentration effort on long run policies that will stimulate economic growth. The financial institutions should be strengthened. Healthier and more robust friendly foreign investment policies should be created and maintained. Second, since recurrent expenditure FDI has effect on standard of living. This study recommends that government should partners with foreign investors to enhance good standard of living of populace.