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Constitutional instability and foreign direct investment in Africa

Constitutional instability and foreign direct investment in Africa This paper assesses the impact of constitutional changes on foreign direct investment (FDI) in 49 African countries during the period 1980–2020. The paper uses a dummy variable related to the year of the constitutional change and the number of changes during the study period to capture the frequency of constitutional changes. The results reveal that an increase in the frequency of constitutional changes negatively affects FDI. The negative relationship between constitutional change and FDI is consistent across different measures of constitutional change and FDI and is robust to alternative empirical approaches. These results suggest that frequent constitutional changes may create uncertainty and instability in the investment climate, which may discourage foreign investors from investing in these African countries. The study provides evidence for policymakers that a stable constitutional framework may attract FDI in African countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics of Transition and Institutional Change Wiley

Constitutional instability and foreign direct investment in Africa

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Publisher
Wiley
Copyright
© 2023 European Bank for Reconstruction and Development.
ISSN
2577-6975
eISSN
2577-6983
DOI
10.1111/ecot.12372
Publisher site
See Article on Publisher Site

Abstract

This paper assesses the impact of constitutional changes on foreign direct investment (FDI) in 49 African countries during the period 1980–2020. The paper uses a dummy variable related to the year of the constitutional change and the number of changes during the study period to capture the frequency of constitutional changes. The results reveal that an increase in the frequency of constitutional changes negatively affects FDI. The negative relationship between constitutional change and FDI is consistent across different measures of constitutional change and FDI and is robust to alternative empirical approaches. These results suggest that frequent constitutional changes may create uncertainty and instability in the investment climate, which may discourage foreign investors from investing in these African countries. The study provides evidence for policymakers that a stable constitutional framework may attract FDI in African countries.

Journal

Economics of Transition and Institutional Change – Wiley

Published: Apr 27, 2023

Keywords: Africa; constitutional instability; foreign direct investment

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