The Impact of Regional Integration on Foreign Direct Investment: The Case of Sub-Saharan Africa

- 3 June 2021

Trade topics: Regional Integration, Trade Modelling, Trade Policy, FDI

The main purpose of this study is to study the impact of Regional Integration on the attractiveness of Foreign Direct Investment in Sub-Saharan African countries. This investigation was carried out using a panel data analysis, over a sample of 30 countries for a time-period of 23 years, from 1996 to 2018. To account for the modelling of dynamics and to establish the short-run and long-run relationships between Foreign Direct Investment, the Unrestricted Vector Autoregressive model was employed. The overall analysis indicates that investors are generally more attracted to SubSaharan African countries by virtue of other factors, rather than the extent of regionalization in the region. These factors are broadly the level of economic growth, the market size, the level of political stability and the level of trade openness of the countries. It can also be inferred from this study that the most influencing factor in attracting Foreign Direct Investment relates to the level of openness displayed by the countries.

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