ABSTRACT:- This article examines the effect of foreign direct investment (FDI) in Cape Verde’s economic growth (EG) from the year 1985 to 2018. FDI is one of the vital indicators of growth which may influence the economy positively or negatively. Inward investment helps the local economy by bringing the managerial skill, decrease the jobless rate, bring innovation, and increase productivity in the recipient nation. For the last three decades, Cape Verde has been able to attract a higher proportion of external investment, which has been one of the key drivers of the national economy. Thus, a detailed analysis is presented on the effect of FDI on the GDP of Cape Verde. The study uses time-series data and since this data requires us to check the integration order of the variable, the auto-regressive distributed lag (ARDL) model is more appropriate in this case. Therefore, we have applied the ARDL approach to this research. The empirical result shows that there is a long-run association running from FDI, labor force, and inflation to GDP growth in Cape Verde. Further, FDI does not granger cause EG. While the factors openness and domestic investment does not have a long-term association with GDP in the national economy. We conclude the study by giving some suggestions.

Keywords: FDI inflow, economic growth (EG), Cape Verde, ARDL model.