An empirical analysis of the relationship between China's direct investment and Benin's economic growth based on VAR model

Abstract

Against the backdrop of a global economic slowdown and the prevalence of trade protectionism, the world economic recovery faces a more severe test, promoting foreign direct investment as one of the world's most dynamic economic activities. Foreign capital is also known as the "engine" of economic development in developing countries. Benin, as one of the world's Least Developed Countries, is heavily dependent on international aid and capital inflows for its economic development, despite its wealth of resources and its strategic location. With the continuous development of the "Belt and Road" initiative and the deepening of China-Africa economic and trade cooperation, Benin's economic development has been increasingly affected by Chinese direct investment. Based on this background, this paper selects the annual data from 1990 to 2018, and analyzes the impact of Chinese direct investment on Benin's economy by the Var model. The results show that Chinese direct investment has a positive effect on Benin's GDP, employment and total factor productivity. On this basis, the paper puts forward countermeasures and suggestions to promote Benin's attractiveness and utilization of China's direct investment.

Keywords: Chinese Direct Investment; Benin; Economic Impact; Var Model

DOI: 10.7176/JESD/16-4-01

Publication date: June 30th 2025