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Title:Analysis of the determinants of foreign direct investment flows to the West African Economic and Monetary Union Countries
Author:Batana, Yélé Maweki
Series:AERC research paper
City of publisher:Nairobi
Publisher:African Economic Research Consortium
Geographic term:West Africa
Subjects:foreign investments
Union Economique et Monétaire Ouest-Africaine
External link:http://publication.aercafricalibrary.org/handle/123456789/200
Abstract:One of the problems facing sub-Saharan African countries is the low level of domestic investment. And yet the growth theory teaches us that it is impossible to envision development without a considerable accumulation of capital. An important channel through which these countries can solve the problem is to resort to foreign direct investment (FDI), especially since we know the significant role FDI played in the economies of several Asian countries. To date, countries in sub-Saharan Africa have not benefited enough from this type of capital. Several reasons for this exist, and they vary with countries and regions. This study, using dynamic panel data, is an attempt to identify the main determinants of the flows of private foreign investment into countries of the West African Economic and Monetary Union (WAEMU). After a review of the general framework of the study, three estimations were carried out: a 'within' estimation, a random effect (RE) estimation, and an estimation using the Arellano and Bond (1991) Generalized Moments Method (GMM). This enables one to get a more effective estimator in cases of dynamic panels. It transpires from the main findings of the research that the rate of domestic investment, literacy, the level of economic openness, and delayed foreign investment are relevant factors that account for foreign investment flows to the WAEMU countries.