FDI to Africa: The role of price stability and currency instability
AbstractAfrica lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining this outcome. Specifically, we document the incidence of inflationary episodes and currency crashes in order to compare countries within the region as well as to make comparisons with other regions. Furthermore, since monetary policy can range from very transparent to very opaque, we assess Africa’s track record with dual and parallel markets. We use the parallel market premia as an indicator of the degree of distortions and extent of transparency. Our findings, suggest that this is a promising line of inquiry because Africa does stand apart from other regions in this measure of transparency. We also discuss some of the fiscal underpinnings of Africa’s bouts with high inflation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 13872.
Date of creation: Aug 2002
Date of revision:
parallel market exchange rates inflation capital controls volatility foreign direct investment;
Find related papers by JEL classification:
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
- Reinhart, Carmen & Calvo, Guillermo, 1999. "The Consequences and Management of Capital Inflows: Lessons for Sub-Saharan Africa," MPRA Paper 7901, University Library of Munich, Germany.
- Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 1998.
"Is the Price Level Determined by the Needs of Fiscal Solvency?,"
NBER Working Papers
6471, National Bureau of Economic Research, Inc.
- Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2001. "Is the Price Level Determined by the Needs of Fiscal Solvency?," American Economic Review, American Economic Association, vol. 91(5), pages 1221-1238, December.
- Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1998. "Is the Price Level Determined by the Needs of Fiscal Solvency?," CEPR Discussion Papers 1772, C.E.P.R. Discussion Papers.
- Carmen M. Reinhart & Vincent R. Reinhart, 2001.
"What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility,"
NBER Working Papers
8535, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
- Collier, Paul & Hoeffler, Anke, 2000.
"Greed and grievance in civil war,"
Policy Research Working Paper Series
2355, The World Bank.
- Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer, vol. 4(3), pages 381-99.
- Woodford, Michael, 1995.
"Price-level determinacy without control of a monetary aggregate,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 43(1), pages 1-46, December.
- Michael Woodford, 1995. "Price Level Determinacy Without Control of a Monetary Aggregate," NBER Working Papers 5204, National Bureau of Economic Research, Inc.
- Stanley Fischer & Franco Modigliani, 1978.
"Towards An Understanding of the Real Effects and Costs of Inflation,"
NBER Working Papers
0303, National Bureau of Economic Research, Inc.
- Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 810-833, December.
- Sebastian Edwards & Jeffrey A. Frankel, 2002. "Preventing Currency Crises in Emerging Markets," NBER Books, National Bureau of Economic Research, Inc, number edwa02-2.
- Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
- Stanley Fischer & Ratna Sahay & Carlos A. V�gh, 2002.
"Modern Hyper- and High Inflations,"
Journal of Economic Literature,
American Economic Association, vol. 40(3), pages 837-880, September.
- Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 2002. "Modern Hyper- and High Inflations," NBER Working Papers 8930, National Bureau of Economic Research, Inc.
- Stanley Fischer & Ratna Sahay & Carlos A. VÃ©gh Gramont, 2002. "Modern Hyper- and High Inflations," IMF Working Papers 02/197, International Monetary Fund.
- Helmut Wagner & Wolfram Berger, 2004.
"Globalization, Financial Volatility and Monetary Policy,"
Springer, vol. 31(2), pages 163-184, June.
- Helmut Wagner & Wolfram Berger, 2004. "Globalization, Financial Volatility and Monetary Policy," Economic Change and Restructuring, Springer, vol. 31(2), pages 163-184, June.
- Diane Wilcox & Tim Gebbie, 2013. "Factorising equity returns in an emerging market through exogenous shocks and capital flows," Papers 1306.5302, arXiv.org, revised Jul 2013.
- Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011.
"Sovereign borrowing by developing countries: What determines market access?,"
Journal of International Economics,
Elsevier, vol. 83(2), pages 243-254, March.
- R. Gaston Gelos, Ratna Sahay and Guido Sandleris, 2008. "Sovereign Borrowing by Developing Countries: What Determines Market Access?," Business School Working Papers 2008-02, Universidad Torcuato Di Tella.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.