Does FDI Dampen or Magnify Output Growth Volatility in the ECOWAS Region?

This paper investigates whether FDI dampens or magnifies output growth volatility in 11 countries within the ECOWAS region over a period spanning 1980 through 2013. Using a quantile regression approach, our findings show that FDI dampens output growth volatility not across the quintiles but only in countries with high volatility episodes. In essence, FDI does not seem to exert any significant effects on countries with low output volatility experience. Also, in controlling for some country-specific factors, our result shows the magnifying impacts of such variables like fiscal structure, money growth as well as exchange rates volatilities. Thus, increasing FDI accompanied by a conducive economic environment especially in the most volatile countries is advocated. Furthermore, a duly regulated exchange rate policy coupled with prudent government spending mostly on productive economic activities should be encouraged and implemented to reduce output volatility in the region.