The African Financial Review July-August 2014 | Page 47

Figure 4. Trends in FDI and growth in Central Africa.

Figure 5. Trends in FDI and growth in South Africa.
Tests for the significance of threshold effects

adopted to simulate the asymptotic distribution of the following
likelihood ratio test of Ho: B1 =B2.

It is imperative to say that most of the indicators are not
statistically significant. This is because the Likelihood Ratio values
are less than the C(a) value. In Algeria, Cameroun, Democratic
Republic of Congo, Ghana, Egypt, Kenya, South Africa, Tunisia
and Zambia all the three indicators (DCB, LLY and DCP) are
not significant at 5 and 10% which are given as 7.3523 and 5.9395
respectively of the Asymptotic Critical Value Distribution table
produced by Hansen (2000).

However, in Congo Republic, DCP was found to be

4

5

Having identified the threshold level for FSD indicators in
selected countries in SSA, it is important to determine whether
the threshold effects are statistically significant. To do this,
the study tests the null hypothesis of no threshold against the
alternative hypothesis of one threshold. As earlier explained,
under the null hypothesis, that is, Ho: B1 = B2, the threshold
level of FIN γ* is not identified. Thus, the classical tests have nonstandard distributions and cannot be applied. To overcome this
problem, the Bootstrap method as suggested by Hansen (2000) is

As earlier stated, the study adopts a time series analysis for 15 countries. Due space
management, it is practically impossible to report all the variables in the model
individually for the 15 countries. What we did was to report the parameter for the
interactive term between FDI and FSD only, since the objective of the study is to
determine the threshold value for FSD that will lead to growth through FDI.
However, the full result can be made available on request.

The level of FSD in the chapter refers to the required level of FSD that will
necessitate the positive impact of FDI on growth. The value is expressed as a
percentage share of GDP

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