Impact of institutional quality on foreign capital invested in Africa

Impact de la qualité institutionnelle sur les capitaux étrangers investis en Afrique

Oualid Mechti and Khadija El Issaoui
Additional contact information
Oualid Mechti: UM5 - Université Mohammed V de Rabat [Agdal]
Khadija El Issaoui: UM5 - Université Mohammed V de Rabat [Agdal]

Post-Print from HAL

Abstract: This paper analyses the short-and long-term impact of institutional quality on FDI inflows in 31 African middle-income countries over the period 2002-2022 using the ARDL method with PMG. We constructed a synthetic index of institutional quality using the principal component analysis method in order to best reproduce the variance of the six kaufman-kray governance indicators. The results show that, in the short term, institutional quality has no effect on FDI inflows, unlike the economic environment, which has an effect in both the short and long term. On the other hand, institutional quality plays a key role in attracting foreign capital in the long term, more so than the economic environment. In fact, a one-percentage point increase in 'institutional quality' generates a 1,068% increase in 'FDI flows'. However, the results of the individual effect of the six governance indicators reveal the importance of these indicators, with a significant and positive coefficient, except for the 'capacity to make demands and express oneself' indicator, which has a negative effect.

Keywords: African middle-income countries FDI flows institutional quality ARDL Pays africains à revenu intermédiaire flux d'IDE qualité institutionnelle ARDL; African middle-income countries; FDI flows; institutional quality; ARDL Pays africains à revenu intermédiaire; flux d'IDE; qualité institutionnelle; ARDL (search for similar items in EconPapers)
Date: 2024-09-15
New Economics Papers: this item is included in nep-fdg and nep-int
Note: View the original document on HAL open archive server: https://hal.science/hal-04698139v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economics, Finance and Management (JEFM), 2024, ⟨10.5281/zenodo.13764963⟩

Downloads: (external link)
https://hal.science/hal-04698139v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04698139

DOI: 10.5281/zenodo.13764963

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().