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Determinants of foreign capital flows: The experience of selected Sub-Saharan African countries

Author

Listed:
  • William Gabriel Brafu-Insaidoo

    (University of Cape Town)

  • Nicholas Biekpe

    (University of Cape Town)

Abstract

This study investigates the major determinants of international capital flows in selected countries in Sub-Saharan Africa. Both theory and the empirical literature suggest that financial liberalization and regionalism lead to higher levels of capital inflows. By using a dynamic panel data analysis, this research tests these hypotheses. The impact of financial liberalization depends on the type of liberalization implemented. Liberalization of the domestic financial system and the domestic equity market has a positive and significant impact on international capital flows. Aggregate capital account liberalization is not significant, but the elimination of multiple exchange rates significantly affects international capital flows, while other components have a more limited impact: the liberalization of inward FDI directly increases foreign direct investments, whilst the deregulation of offshore borrowing directly causes an increase in foreign debt inflows. Regionalism causes an increase in foreign direct investment inflows but does not affect other forms of capital inflows.

Suggested Citation

  • William Gabriel Brafu-Insaidoo & Nicholas Biekpe, 2014. "Determinants of foreign capital flows: The experience of selected Sub-Saharan African countries," Journal of Applied Economics, Universidad del CEMA, vol. 17, pages 63-88, May.
  • Handle: RePEc:cem:jaecon:v:17:y:2014:n:1:p:63-88
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    File URL: https://ucema.edu.ar/publicaciones/download/volume17/brafu.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mouna Gammoudi & Mondher Cherif, 2016. "Capital Account Openness, Political Institutions And Fdi In Mena Region: An Empirical Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(2), pages 53-76, June.
    2. repec:lrc:lareco:v:5:y:2017:i:4:p:24-44 is not listed on IDEAS
    3. Nyang`oro Owen, 2017. "Working Paper 285 - Capital Inflows and Economic Growth in Sub-Saharan Africa," Working Paper Series 2409, African Development Bank.

    More about this item

    Keywords

    international capital flows; financial liberalization;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F3 - International Economics - - International Finance
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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