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Structural and institutional determinants of investment activity in Africa

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  • Chuku, Chuku
  • Onye, Kenneth
  • Ajah, Hycent

Abstract

This paper considers the structural and institutional determinants of investment activity in selected African countries within a neoclassical framework. Generalized method of moments and a family of panel data estimation techniques are utilized in addition to nonparametric kernel regression techniques to uncover the relationship. Three main findings emerge; (i) financial openness and institutional quality are reasonably robust structural and institutional determinants of investment activity in Africa respectively, (ii) there is evidence of nonlinearity in the relationship and there exist a threshold level of financial openness that achieves the highest level of investment, (iii) using interaction terms, the inhibiting effect of financial openness is potentially less in countries with higher levels of institutional quality, (iv) promoting institutional quality is an effective policy towards facilitating investment activity in Africa.

Suggested Citation

  • Chuku, Chuku & Onye, Kenneth & Ajah, Hycent, 2015. "Structural and institutional determinants of investment activity in Africa," MPRA Paper 68163, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68163
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    References listed on IDEAS

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    More about this item

    Keywords

    Investments; financial openness; institutional quality; nonparametric regression; GMM;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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