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Determinants of foreign direct investment in Africa: An analysis of the impact of financial development

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  • Bruno Emmanuel Ongo Nkoa

    (University of Buea)

Abstract

This paper investigates the impact of financial development on Foreign Direct Investment (FDI) in 52 African countries under the OLI Dummy's paradigm from 1995 to 2015. The sample is made up of 35 countries without financial market and 17 countries with a financial market. The empirical methodology is based on the Generalized Method of Moments (GMM). Our empirical results show that, money and quasi money, banking credit to private sector and interest rate liberalisation play a positive role on FDI in countries without financial market. Money and quasi money, market capitalisation and financial market value traded positively influence FDI in countries with financial market. The study suggests, with regard to the low level of our estimated coefficients, that African countries need to reinforce their financial reforms.

Suggested Citation

  • Bruno Emmanuel Ongo Nkoa, 2018. "Determinants of foreign direct investment in Africa: An analysis of the impact of financial development," Economics Bulletin, AccessEcon, vol. 38(1), pages 221-233.
    • Handle: RePEc:ebl:ecbull:eb-17-00647
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    2. Thierry Mamadou Asngar, 2022. "Does financial development improve access to electricity in sub-Saharan Africa?," SN Business & Economics, Springer, vol. 2(9), pages 1-18, September.

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    More about this item

    Keywords

    Foreign direct investment; financial development; banking system; stock market; Africa; generalized method of moments;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • G2 - Financial Economics - - Financial Institutions and Services

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