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Governance and Domestic Investment in Africa

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  • Chimere O. Iheonu

    (University of Nigeria, Nsukka)

Abstract

The study empirically examined the impact of governance on domestic investment in 16 African countries with a balanced panel data set, between the years 2002 and 2015. The study employed six unbundled governance indicators from the World Bank, World Governance Indicators and constructed three bundled governance indicators using the Principal Component Analysis. The Driscoll and Kraay Fixed Effects model which accounts for serial correlation, groupwise heteroskedasticity and cross-sectional dependence were employed with empirical results revealing that all the indicators of governance positively and significantly influence domestic investment in Africa, except for government effectiveness which happens to be insignificant. Also, Voice/Accountability and the Control of Corruption exert more influence on domestic investment as indicated by their coefficient values. Furthermore, economic growth is also an important factor in explaining domestic investment in Africa. Policy recommendations are discussed.

Suggested Citation

  • Chimere O. Iheonu, 2019. "Governance and Domestic Investment in Africa," Working Papers of the African Governance and Development Institute. 19/001, African Governance and Development Institute..
    • Handle: RePEc:agd:wpaper:19/001
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    Cited by:

    1. Chimere O. Iheonu & Kingsley O. Odo & Davidmac O. Ekeocha, 2020. "Estimating the effect of Democracy, Governance and Militarisation on Peace in Africa," Working Papers of the African Governance and Development Institute. 20/046, African Governance and Development Institute..
    2. Iheonu O Chimere & Tochukwu Nwachukwu, 2020. "Macroeconomic determinants of household consumption in selected West African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1596-1606.
    3. Chimere O. Iheonu & Ozoemena S. Nwodo & Uchechi S. Anaduaka & Ugochinyere Ekpo, 2020. "Inequality and Female Labour Force Participation in West Africa," Research Africa Network Working Papers 20/076, Research Africa Network (RAN).
    4. Chimere O. Iheonu & Shedrach A. Agbutun & Chinedum J. Chiemela, 2021. "Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy," Working Papers 21/041, European Xtramile Centre of African Studies (EXCAS).
    5. Chopra, Ritika & Magazzino, Cosimo & Shah, Muhammad Ibrahim & Sharma, Gagan Deep & Rao, Amar & Shahzad, Umer, 2022. "The role of renewable energy and natural resources for sustainable agriculture in ASEAN countries: Do carbon emissions and deforestation affect agriculture productivity?," Resources Policy, Elsevier, vol. 76(C).
    6. Iheonu Chimere O. & Ichoku Hyacinth E., 2022. "Terrorism and investment in Africa: Exploring the role of military expenditure," Economics and Business Review, Sciendo, vol. 8(2), pages 92-112, July.
    7. Simplice A. Asongu & Chimere O. Iheonu & Kingsley O. Odo, 2019. "The Conditional Relationship between Renewable Energy and Environmental Quality in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 19/074, African Governance and Development Institute..
    8. Chimere O. Iheonu & Ozoemena S. Nwodo & Uchechi S. Anaduaka & Ugochinyere Ekpo, 2020. "Inequality and Female Labour Force Participation in West Africa," Working Papers of the African Governance and Development Institute. 20/076, African Governance and Development Institute..
    9. Ibrahim A. Adekunle, 2020. "On the search for environmental sustainability in Africa: the role of governance," Research Africa Network Working Papers 20/078, Research Africa Network (RAN).
    10. Chimere O. Iheonu & Simplice A. Asongu, 2022. "Democracy and Lifelong Learning in Africa," Working Papers of the African Governance and Development Institute. 22/067, African Governance and Development Institute..
    11. Iheonu, Chimere & Asongu, Simplice & Odo, Kingsley & Ojiem, Patrick, 2020. "Financial Sector Development and Investment in Selected ECOWAS Countries: Empirical Evidence using Heterogeneous Panel Data Method," MPRA Paper 107102, University Library of Munich, Germany.
    12. Chimere O. Iheonu & Ogochukwu C. Anyanwu & Obinna K. Odo & Solomon Prince Nathaniel, 2021. "Does Economic Growth, International Trade and Urbanization uphold Environmental Sustainability in sub-Saharan Africa? Insights from Quantile and Causality Procedures," Working Papers of the African Governance and Development Institute. 21/003, African Governance and Development Institute..
    13. Chimere O. Iheonu & Ogochukwu C. Anyanwu & Obinna K. Odo & Solomon Prince Nathaniel, 2021. "Does Economic Growth, International Trade and Urbanization uphold Environmental Sustainability in sub-Saharan Africa? Insights from Quantile and Causality Procedures," Working Papers 21/003, European Xtramile Centre of African Studies (EXCAS).
    14. Chimere O. Iheonu & Shedrach A. Agbutun & Chinedum J. Chiemela, 2021. "Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy," Research Africa Network Working Papers 21/041, Research Africa Network (RAN).
    15. Boker Poumie & Dounya Matsop Claude, 2021. "Does Foreign Capital Really Matter for Employment? Evidence from Agricultural Dominance African Countries," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(2), pages 88-104, June.
    16. Ibrahim A. Adekunle, 2020. "On the search for environmental sustainability in Africa: the role of governance," Working Papers of the African Governance and Development Institute. 20/078, African Governance and Development Institute..
    17. Chimere O. Iheonu & Simplice A. Asongu & Kingsley O. Odo & Patrick K. Ojiem, 2020. "Financial sector development and Investment in selected countries of the Economic Community of West African States: empirical evidence using heterogeneous panel data method," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-15, December.
    18. Chimere O. Iheonu & Ogochukwu C. Anyanwu & Obinna K. Odo & Solomon Prince Nathaniel, 2021. "Does Economic Growth, International Trade and Urbanization uphold Environmental Sustainability in sub-Saharan Africa? Insights from Quantile and Causality Procedures," Research Africa Network Working Papers 21/003, Research Africa Network (RAN).
    19. Ibrahim A. Adekunle, 2020. "On the search for environmental sustainability in Africa: the role of governance," Working Papers 20/078, European Xtramile Centre of African Studies (EXCAS).
    20. Chimere O. Iheonu & Shedrach A. Agbutun & Chinedum J. Chiemela, 2021. "Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy," Working Papers of the African Governance and Development Institute. 21/041, African Governance and Development Institute..
    21. Chimere O. Iheonu & Ozoemena S. Nwodo & Uchechi S. Anaduaka & Ugochinyere Ekpo, 2020. "Inequality and Female Labour Force Participation in West Africa," Working Papers 20/076, European Xtramile Centre of African Studies (EXCAS).
    22. Chimere O. Iheonu & Ozoemena S. Nwodo & Uchechi S. Anaduaka & Ugochinyere Ekpo, 2020. "Inequality and Female Labour Force Participation in West Africa," Working Papers of The Association for Promoting Women in Research and Development in Africa (ASPROWORDA). 20/008, The Association for Promoting Women in Research and Development in Africa (ASPROWORDA).
    23. Chimere O. Iheonu & Kingsley O. Odo & Davidmac O. Ekeocha, 2020. "Estimating the effect of Democracy, Governance and Militarisation on Peace in Africa," Research Africa Network Working Papers 20/046, Research Africa Network (RAN).
    24. Chimere Iheonu & Shedrach Agbutun & Chinedum Chiemela, 2021. "Human Rights in Sub Saharan Africa: Understanding the Influence Of Militarisation, Governance and Democracy," Economics Bulletin, AccessEcon, vol. 41(3), pages 1070-1081.

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    More about this item

    Keywords

    Governance; Domestic Investment; Africa; PCA; Fixed Effects Model;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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