Analysis of the determinants of foreign direct investment flows in Waemu countries

Abstract

One of the problems which Sub-Saharan African countries are confronted with is low levels of investment. Yet, the theory of growth tells us that it is impossible to consider development without a substantial accumulation of capital. An important channel through which these countries can solve the problem is to resort to foreign direct investment (FDI). This paper, using dynamic panel data, sets out to identify the main determinants of the flows of foreign investment in countries of the WAEMU. The estimation mainly based on Arellano and Bond (1991) GMM estimator suggests that the domestic investment, the literacy rate, the openness degree and the lagged foreign investment are relevant in the explanation of foreign investment flows in these countries. African Journal of Economic Policy Vol. 11(2) 2004: 27-48