This study utilizes country-level panel data to examine the impact of foreign direct investment on the gross domestic product per capita in the Common Market for Eastern and Southern Africa region between 2000 and 2015. The estimates are generated using the one-step generalized method of moments-difference estimator. The study found that foreign direct investment exerted a negative while capital account liberalization has a positive impact on the gross domestic product per capita in the region. Also, the capital account liberalization has a positive effect on the ability of the region to absorb and benefit from the spillovers of foreign direct investment. The findings suggest that the countries of the region should target to attract foreign direct investment which complements economic growth and improve on the capital account liberalization in order to experience positive economic growth from the foreign direct investment.

Keywords:  COMESA, Economic growth, Capital account liberalization, Foreign direct investment, Generalized method of moments