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Studies on Economic Development and Growth in Selected African CountriesMacroeconomic, Political, and Institutional Determinants of FDI Inflows to Ethiopia: An ARDL Approach

Studies on Economic Development and Growth in Selected African Countries: Macroeconomic,... [Based on the lines of the eclectic theoretical framework of Foreign direct investment (FDI) flows, this study investigates the macroeconomic, political, and institutional determinants of FDI inflowsFDI inflows to Ethiopia for the period 1970–2013. Using the ARDLAutoregressive distributed lag modeling approach, it finds that political and institutional factorsInstitutional factors are crucial both in the long run and the short run in FDI inflows to the country. On the macroeconomic side, the market size of the country, availability of natural resourcesNatural resources, openness to trade, and deprecation in the nominal exchange rateExchange rate trade zones are found to positively affect FDI inflows to the country. On the other hand, macroeconomic instability is found to effect FDI inflows negatively. In addition, better political stabilityPolitical stability, government effectivenessGovernment effectiveness and regulatory qualityRegulatory quality, and better performance of the rule of lawRule of law are found to positively affect FDI inflowsFDI inflows to the country. A careful liberalization of the foreign exchange market and that of external trade, sustaining the current growth momentum of the economy, improving institutional qualityInstitutional quality, and strengthening the political stabilityPolitical stability of the country, among others, are fundamental areas that the government could work on to strengthen Ethiopia’s position in FDI inflows on the continent.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Studies on Economic Development and Growth in Selected African CountriesMacroeconomic, Political, and Institutional Determinants of FDI Inflows to Ethiopia: An ARDL Approach

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Publisher
Springer Singapore
Copyright
© Springer Nature Singapore Pte Ltd. 2017
ISBN
978-981-10-4450-2
Pages
123 –151
DOI
10.1007/978-981-10-4451-9_7
Publisher site
See Chapter on Publisher Site

Abstract

[Based on the lines of the eclectic theoretical framework of Foreign direct investment (FDI) flows, this study investigates the macroeconomic, political, and institutional determinants of FDI inflowsFDI inflows to Ethiopia for the period 1970–2013. Using the ARDLAutoregressive distributed lag modeling approach, it finds that political and institutional factorsInstitutional factors are crucial both in the long run and the short run in FDI inflows to the country. On the macroeconomic side, the market size of the country, availability of natural resourcesNatural resources, openness to trade, and deprecation in the nominal exchange rateExchange rate trade zones are found to positively affect FDI inflows to the country. On the other hand, macroeconomic instability is found to effect FDI inflows negatively. In addition, better political stabilityPolitical stability, government effectivenessGovernment effectiveness and regulatory qualityRegulatory quality, and better performance of the rule of lawRule of law are found to positively affect FDI inflowsFDI inflows to the country. A careful liberalization of the foreign exchange market and that of external trade, sustaining the current growth momentum of the economy, improving institutional qualityInstitutional quality, and strengthening the political stabilityPolitical stability of the country, among others, are fundamental areas that the government could work on to strengthen Ethiopia’s position in FDI inflows on the continent.]

Published: May 3, 2017

Keywords: ARDL; Determinants; Ethiopia; FDI; Macroeconomic stability; Political; Institutional

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