n AfricaGrowth Agenda - Foreign direct investment and inflation variability : evidence from ECOWAS countries

Volume 2017 Number 4
  • ISSN : 1811-5187



In this paper, we examined the impact of inflation variability on foreign direct investment (FDI) inflows to selected ECOWAS countries. While using GARCH (1,1) to measure inflation variability, it was found that there is persistence in inflation dynamics in these selected countries. In all, estimates from both OLS and SYS-GMM suggested that inflation variability appeared to encourage FDI inflows. Th is seemingly counter intuitive finding, however, could plausibly be linked to the inflationary experiences in these countries. More precisely, since inflation variability is “anticipated” and thereby not so “shocking”, FDI inflows may not be deterred. Overall, these results remained valid amid robustness checks. Hence, we documented few relatable policy implications.

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