Inflows of foreign direct investment to ECOWAS countries: an empirical analysis

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Omosefunmi, Tolulope B.
University of Lethbridge. Faculty of Arts and Science
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Lethbridge, Alta. : University of Lethbridge, Dept. of Economics
The importance of Foreign Direct Investment (FDI) for economic growth and development is much discussed in the economic growth and development literature. Inward FDI provides a source of capital for host countries, and it is particularly beneficial for developing countries through knowledge spillover, advanced technology transfers, and employment creation. The Economic Community of West African States (ECOWAS) is one of the main regional trade blocs in Sub-Saharan Africa (SSA), and it is primarily distinguished by having the greatest levels of FDI inflows among geo-economic regions in SSA. While there have been general increases in inward FDI over time, there remain various economic and political challenges and broad potentials to stimulate inward FDI to the ECOWAS region. This thesis investigates the determinants of FDI inflows to ECOWAS countries using panel dataset covering various countries and spanning from 2001 to 2019. The empirical research particularly focuses on the effects of trade openness and economic growth, among other factors, on FDI inflows to the ECOWAS region. Pooled Ordinary Least Squares (OLS), panel data random effect, and panel data fixed effect estimators are used to implement the regressions, and various empirical equations are specified. The empirical analysis initially executes the regressions for a sub-dataset that exclusively covers ECOWAS countries. Then, the empirical analysis is implemented for a broad dataset that covers a range of developed and developing countries to benefit from variations in the dataset. The main empirical results show important positive effects of trade openness on FDI inflows to the ECOWAS region. It also shows positive effects of economic growth, economic development, and infrastructure on FDI inflows to the ECOWAS region. These findings highlight the particular significance of trade openness and economic growth policies in stimulating FDI inflows to the ECOWAS region. Also, ECOWAS countries should adopt policies to achieve higher levels of economic development that is accompanied with improvement in economic and financial institutions, increases in human capital, and more developed infrastructure.  
Foreign Direct Investment , ECOWAS , SSA , trade openess , infrastructure , economic growth , Investments, Foreign--Africa, West