—This paper will examine the factors that influence
foreign direct investment (FDI) flows into African countries.
FDI flows are important for African nations as they promote
economic development. Estimation results using the Least
Squares Dummy Variable model also known as the fixed effects
model indicate that i) a high economic risk has a negative and
significant effect on FDI flows into Africa ii) both political risk
and financial risk have a negative but insignificant impact on
FDI inflows iii) there is a positive and significant relationship
between the commodity price index performance and FDI
inflows iv) the good performance of stock markets in developed
countries has a positive and significant impact on FDI inflows v)
an increase in the infrastructure of a country has a positive and
significant effect on FDI inflows vi) an increase in openness to
trade has a positive and significant effect on FDI inflows vii) the
amount of FDI received in the previous year by African
countries is significant in influencing the FDI flows that come
into the African continent in the current year. Annual data
from 1984 until 2010 using 35 African countries is used for this
—Africa, foreign direct investment, long term
capital movements, panel data.
C. Kariuki is with the Department of Economics and Finance, Curtin
University, Australia (e-mail: firstname.lastname@example.org).
Cite: Caroline Kariuki, "The Determinants of Foreign Direct Investment in the
African Union," Journal of Economics, Business and Management vol. 3, no. 3, pp. 346-351, 2015.