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Enhancing intra-regional trade in sub-saharan Africa: an exploration of threshold effects and the intermediation role of FDI and tourism

Author

Listed:
  • David Aboagye Danquah

    (University of Professional Studies)

  • Ibrahim Mohammed

    (The Hong Kong Polytechnic University)

Abstract

This study determined the Foreign Direct Investment (FDI) threshold level necessary for international tourism to significantly enhance intra-regional trade in Africa. The study employed the system Generalised Method of Moment (GMM) and dynamic threshold estimation technique on annual panel data from 48 countries in sub-Saharan Africa from 1990 to 2023. The study revealed that while international tourism negatively impacts intra-trade, FDI significantly enhances intra-regional trade in Sub-Saharan Africa. Moreover, the interaction between tourism development and FDI, with a significant coefficient of 0.0248%, suggests a complementary role of the two variables in improving intra-trade performance. Finally, the study identified a significant FDI threshold of 7.723%, which is necessary for tourism to positively influence intra-regional trade. The study recommends that policymakers implement targeted support programs for trade-related investments, create a favourable environment for attracting and retaining FDI, integrate tourism development with FDI strategies, and aim to surpass the FDI threshold to maximize the benefits of tourism on trade.

Suggested Citation

  • David Aboagye Danquah & Ibrahim Mohammed, 2025. "Enhancing intra-regional trade in sub-saharan Africa: an exploration of threshold effects and the intermediation role of FDI and tourism," SN Business & Economics, Springer, vol. 5(1), pages 1-23, January.
    • Handle: RePEc:spr:snbeco:v:5:y:2025:i:1:d:10.1007_s43546-024-00780-w
    DOI: 10.1007/s43546-024-00780-w
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    More about this item

    Keywords

    Foreign Direct Investment; Intra-Trade; Tourism Development; Africa; Threshold;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Z32 - Other Special Topics - - Tourism Economics - - - Tourism and Development

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