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The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries

Mumtaz Shah

MPRA Paper from University Library of Munich, Germany

Abstract: In this study an attempt is made to gauge the importance of prudent macro-economic management in the location choice decision of foreign direct investors. Moreover, infrastructure availability, market size, trade liberalisation and economic development are also considered, for a set of forty three African developing countries using annual data from 1990 to 2015. The results show that better infrastructure, liberalised investment and trade regimes have significant effects on FDI inflows to the African nations. Conjectured with the host market theory hypothesis, the size of the host market positively affects inward FDI. Moreover, prudent management of macro-economy and healthy business policies manifested through stable macroeconomic indicators increases the ability of the African developing countries included in the study to receive additional Foreign Direct Investment. These findings are insensitive to the use of different proxies used for the control variables.

Keywords: FDI; African Developing Countries; Macroeconomic Stability; Market Size; Domestic Market Liberalisation; Infrastructure availability. (search for similar items in EconPapers)
JEL-codes: C23 F13 F14 F21 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-int
Date: 2016-12-30
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Published in International Journal of Business Studies Review 1.1(2016): pp. 1-11

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