<p><span>Asymmetric Relationship between Foreign Direct Investment and Economic Growth in East Africa</span></p>

This study examines the asymmetric relationship between foreign direct investment (FDI) and economic growth in seven East African countries, namely Burundi, Ethiopia, Kenya, Madagascar, Mauritius, Tanzania, and Uganda, using balanced panel data covering 1990-2023. A Panel Nonlinear Autoregressive Distributed Lag (NARDL) framework is employed to distinguish the short and long-run effects of positive and negative FDI shocks. The nonlinear bounds test confirms the existence of a long-run asymmetric relationship between FDI and economic growth. In the short run, both positive and negative FDI components are statistically significant, with coefficients of 0.032 and 0.067, respectively. Given the construction of the negative partial-sum component, the results indicate that FDI contractions are associated with lower economic growth and generate a comparatively stronger short-run response than positive FDI shocks. In the long run, both positive and negative FDI components are negative and statistically significant, with coefficients of -0.114 and -0.098, respectively. The asymmetric responses across adjustment horizons indicate that the growth effects of FDI vary according to both the direction and persistence of FDI shocks. These findings are interpreted as conditional associations rather than causal effects and suggest that the developmental contribution of FDI depends on the structural and institutional conditions governing its absorption and utilization. Accordingly, policy should move beyond maximizing FDI volumes toward enhancing investment quality, domestic absorptive capacity, institutional effectiveness, technology transfer, and resilience to external capital-flow disturbances.