Abstract

This study examines the long-run impact of foreign direct investment and trade openness on economic growth in Cote d’Ivoire. To assess this purpose, the study uses the more recent data analysis technique the bounds testing cointegration approach (Pesaran et al, 2001) and the VAR Granger causality/Block Exogeneity Wald tests. The data span for the study is from 1980-2007. Amongst the key results it is found: a long run relationship between the foreign direct investment, trade openness and output; and the VAR Granger causality/Block Exogeneity Wald tests reveals unidirectional causal relationship running from foreign direct investment, trade openness to output and from output, foreign direct investment to trade openness. Both foreign direct investment and trade openness are significant in explaining output growth in Cote d’Ivoire. Therefore this study concludes by recommending, among other things, the Cote d’Ivoire by the opportunities offered by world markets have to manage a good combination with a domestic investment and institution-building strategy to attract more inflows of foreign direct investment for output growth dynamics.

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