Governance Quality and Multinational Investment Inflows in Sub-Sahara Africa: System General Method of Moment (SGMM) Approach
Abstract
The sustainable development experienced by many advanced countries is predicated on gains from private investment inflows to such economies. However, the Sub-Saharan Africa (SSA) has not been able to harness such benefits.The study examined whether governance quality influence multinational investment inflow. The study utilized System GMM in investigating the relationship using total enumeration of 48 SSA countries for the period of 2004-2018 (15years). The results showed that quality of governance is relatively weak across SSA, as SSA countries score below average in the world governance index (WGI) vis-avi voice and accountability, governance effectiveness and political stability and absence of violence. The inferential result finds that governance quality dimensions individually shows diverse patterns (-0.802, p < 0.05; -18.303 p < 0.05; -0.051 p > 0.05) but jointly exert significant impact on multinational investment inflow (24.260, p < 0.05) This may partly elucidate why SSA is lagging behind in attracting foreign investments as compared to other regional blocs in the developing countries. The policy implication of this study is for policymakers to further improve the quality of governance in the region and promote policies that would further attract the inflows of multinational investments into into the sub-region.
Keywords: Governance Quality, Multinational Investment Inflows, Foreign Direct Investment, Sub-Sahara Africa System, System GMM
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