This study investigates the nexus between energy demand and foreign direct investment (FDI) in Africa, using the simultaneous system Generalized Method of Moments estimator and panel data that consists of 27 African countries over the period 2000–2014. Specifically, the study hypothesizes a non-linear relationship between energy demand and FDI, which imposes the assumption that conditions, such as the level of technology absorptive capacity, the level, and stage of development and adjustment cost are likely to be heterogeneous across cross-section and over time. Several empirical strategies, such as changing the structure of the model set-up, using different sample groupings and applying different estimators with different assumptions were employed to substantiate the robustness nature of the hypothesized relationship. The findings revealed a robust concave effect of FDI on energy consumption. This suggests that there are learning and imitation experiences associated with FDI, and these experiences produce dichotomous paths in terms of realizing the energy-saving benefits of FDI.
- Energy demand
- Foreign direct investment (FDI)
- Generalized method of moments
ASJC Scopus subject areas
- Economics and Econometrics
- General Energy