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The foreign aid–foreign direct investment relationship in Africa: The mediating role of institutional quality and financial development

Olufemi Adewale Aluko

Economic Affairs, 2020, vol. 40, issue 1, 77-84

Abstract: The interaction of foreign aid and foreign direct investment is an important issue for developing countries in Africa. I probe into the mediating role of institutional quality and financial development using a panel data set of 47 countries over the period 1996–2016. I find that the effectiveness of foreign aid in attracting foreign direct investment is greater in countries with better institutional quality and sound financial development. The implications for policy are outlined.

Date: 2020
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