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Macro-economic Factors and Foreign Direct Investment Flows into Eastern Africa Region

Author

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  • Eric M. Bosire

    (School of Management, Huazhong University of Science and Technology, P.R. Chin)

Abstract

The flow of capital across borders is one of the pillars that is greasing the wheels of globalization due to its benefits in technology transfer. Since developing nations are unable to put together adequate savings to take care of their investments needs, foreign direct investments come in to bridge the gap. However, some of these nations experience many structural challenges such as unstable macro-economic conditions which inhibit inflow of foreign direct investments. This makes it necessary for investors to scan environments before deciding where to invest. Using panel data from 12 eastern Africa countries from 2004 through 2016 and GLS estimation method, this study examined the effects of macro-economic factors (economic growth, interest rates, exchange rates and inflation) on foreign direct investment inflows. From the study, it was then established that economic growth, exchange rate and inflation have a positive but non-significant effect on foreign direct investment flows into eastern Africa region but interest rates had a negative and non-significant relationship. Governments are then advised to formulate policies that ensure stable macro-economic conditions to attract more foreign direct investments.

Suggested Citation

  • Eric M. Bosire, 2018. "Macro-economic Factors and Foreign Direct Investment Flows into Eastern Africa Region," International Journal of Economics and Financial Issues, Econjournals, vol. 8(5), pages 200-209.
    • Handle: RePEc:eco:journ1:2018-05-27
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    Citations

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    Cited by:

    1. Eric M. Bosire, 2019. "Foreign Direct Investments into Eastern Africa Region: The Governance Paradox," International Journal of Economics and Financial Issues, Econjournals, vol. 9(1), pages 169-182.
    2. Tomiwa Sunday Adebayo & Kelvin Onyibor & Gbenga Daniel Akinsola, 2021. "The impact of major macroeconomic variables on foreign direct investment in Nigeria: evidence from a wavelet coherence technique," SN Business & Economics, Springer, vol. 1(1), pages 1-24, January.

    More about this item

    Keywords

    Foreign direct investments; Economic growth; Interest rates; Inflation; Exchange rates;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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