An International Finance Perspective to AfCFTA: The Relationship between Financial Development, Foreign Direct Investment, and Trade Liberalization with Economic Growth in Africa

While protectionism is on the rise around the world, 54 of 55 African countries signed an agreement called the Africa Continental Free Trade Area (AfCFTA) in July 2019, to integrate the economies of countries in Africa, and drive it towards peace and prosperity. This research used the FMOLS/DOLS tests and Dumitrescu-Hurlin Panel Granger based Causality technique to illustrate the long-term effects of some significant international finance elements on economic growth in Africa, particularly financial development, FDI, and trade liberalisation. The intention is to draw attention to how these elements may affect the free trade agreement's goal from the outset. The results obtained confirm that the proxies of trade liberalization, financial development, and FDI have a positive and significant long term influence on economic growth. Also the Dumitrescu-Hurlin panel Granger based Causality test point towards a bidirectional relationship between economic growth and FDI, and financial development and economic growth in Africa. The Granger Causality relationship between trade liberalization is unidirectional, flowing from trade liberalization to economic development.