Foreign direct investment inflow, volatility, and domestic investment in west Africa

Perekunah Eregha

Journal of Developing Areas, 2015, vol. 49, issue 2, 273-394

Abstract: This study empirically examined the effect of foreign direct investment inflow and its volatility on domestic investment in the ECOWAS region as FDI inflow is theoretical recognized as an important catalyst to bridge the Savings gap. The recent Panel Data Cointegration technique of estimation was employed in the study given the possibilities of panel data based studies to be associated with unit root problems as shown by experts in the methodology. Data for the study covered the period 1970-2008 and were extracted from the UN statistics data base and the World Development Indicator, 2009. The results of the empirical analysis revealed that foreign direct investment inflow substituted domestic investment in the West African region. FDI volatility was also found to hamper domestic investment in the region. From policy perspective, since most of the West African countries are faced with poor investment climate and low technical know on the part of the citizenry to harness the spillover effects of FDI inflow, it is therefore recommended that bolstering the investment climate and proper manpower training and development are vital to securing the gains from FDI inflow couple with efforts geared towards attracting FDI to manufacturing sector that is less prone to world price volatility.

Keywords: Foreign Direct Investment Inflow; Foreign Direct Investment Volatility; Domestic Investment and Panel Cointegration Technique (search for similar items in EconPapers)
JEL-codes: C23 F23 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.49:year:2015:issue2:pp:273-294

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