The aim of this study is to examine the consequences of interaction between political
instability and foreign direct investment (FDI) on economic growth of 31 countries in
Sub-Saharan Africa in order to analyse one of the channels through which political
instability affects economic growth. To achieve this objective, the study relies on a
dynamic panel procedure and the Three Stage Least Squares Method to estimate a
model of simultaneous equations over the period 1984-2015. The empirical results
indicate that political instability affects economic growth directly and indirectly through its impact on foreign direct investment. We also highlight the simultaneous character of the relationship between political instability and the level of economic development in Sub-Saharan African countries. The results of the study then corroborate the idea that political instability hinders growth and thus calls for measures to improve the quality of political climate, which is one of the conditions necessary for a country’s economy to benefit from foreign direct investment.
