Financial development, globalisation and foreign direct investment nexus: an empirical study from Africa

Khadijah Iddrisu (), Joshua Yindenaba Abor () and Kannyiri T. Banyen ()
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Khadijah Iddrisu: Simon Diedong Dombo University of Business and Integrated Development Studies
Joshua Yindenaba Abor: University of Ghana Business School
Kannyiri T. Banyen: Simon Diedong Dombo University of Business and Integrated Development Studies

SN Business & Economics, 2024, vol. 4, issue 6, 1-31

Abstract: Abstract This study examined the relationship between financial development, globalisation, and foreign direct investment (FDI) in 49 African countries from 1997 to 2020. Using two-stage least squares, the findings revealed that both financial development and globalisation attract FDI in Africa. However, when financial development was broken down into financial institution development (FII) and financial market development (FMD), only FMD attracted FDI inflows. The findings also show that globalisation form synergy with financial development to further promote FDI inflows. In terms of the components of globalisation, political globalisation synergized with the financial development index, while economic globalisation attracts more FDI than other components. Policymakers should focus on developing stock exchanges, banking systems, and insurance industries, reducing trade barriers, and enhancing access to global markets.

Keywords: Globalisation; Financial development; Africa; 2SLS; FDI (search for similar items in EconPapers)
JEL-codes: D31 D63 E44 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s43546-024-00667-w

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