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Official Development Assistance and Foreign Direct Investment Flows to Sub‐Saharan Africa
Author(s) -
Yasin Mesghena
Publication year - 2005
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/j.1017-6772.2005.00105.x
Subject(s) - foreign direct investment , openness to experience , economics , international economics , exchange rate , per capita , panel data , investment (military) , order (exchange) , developing country , international trade , development economics , monetary economics , politics , macroeconomics , economic growth , political science , finance , law , psychology , social psychology , population , demography , sociology , econometrics
Foreign direct investment is believed to have a positive impact on the economies of the developing countries but its determinants are not yet fully established. This paper empirically investigates the relationship between official development assistances and foreign direct investment flows using panel data from 11 sub‐Saharan African countries for the period 1990–2003. The results show that bilateral official development assistance has a significant and positive influence on foreign direct investment flows. The results also show that trade openness, growth rate in the labor force, and exchange rates have a positive and significant effect on foreign direct investment flows. But multilateral development assistance, the growth rate in GDP per capita, the country's composite risk level, and the index for political freedom and civil liberties do not have a statistically significant effect on foreign direct investment flows. The policy implication of the positive and significant influence of the bilateral official development assistance on foreign direct investment is that the recipient countries need to formulate policies that improve their economic relationships with the donor countries in order to attract greater foreign direct investment flows from the multilateral corporations located in these countries.