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Does monetary integration lead to an increase in FDI flows? An empirical investigation from the West African Monetary Zone(WAMZ)

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  • Tamsir Cham

Abstract

This paper investigates the relationship between monetary integration, foreign direct investment (FDI) and trade in the West African Monetary Zone (WAMZ) using annual time series for the period 1980–2013. It also examines whether trade and FDI are complement or substitute. Several econometric models are applied including Ordinary Least Squares (OLS) and fully-modified OLS (FMOLS). Our empirical results revealed that FDI flows into the WAMZ is influence positively by monetary integration. The findings also suggest that while real GDP, large population size and greater distance positively influence FDI flows, weak economic freedom index negatively impact FDI flows into the zone. The results support the argument that monetary union positively affect trade. Our empirical finding support the hypothesis that FDI and trade flows are complementary. The results are in line with earlier research findings. Therefore, any policy that promotes trade such as monetary integration enhances FDI inflows as well. The findings offer perspectives and insight for a new policy in WAMZ economies in their drive to attain sustainable economic growth.

Suggested Citation

  • Tamsir Cham, 2016. "Does monetary integration lead to an increase in FDI flows? An empirical investigation from the West African Monetary Zone(WAMZ)," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(1), pages 9-20, March.
    • Handle: RePEc:bor:bistre:v:16:y:2016:i:1:p:9-20
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    Citations

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    Cited by:

    1. Cham, Tamsir, 2016. "Investigating the Benefits of a Currency Union to Trade: A Case Study on WAMZ Countries," Policy Papers 2016-2, The Islamic Research and Teaching Institute (IRTI).
    2. Ionel Bostan & Otilia-Roxana Oprea & Ovidiu Stoica, 2020. "Approaching Monetary Integration in the Context of the Imperative to Ensure the Sustainable Growth in the EU," Sustainability, MDPI, vol. 12(17), pages 1-15, August.
    3. Yapatake Kossele Thales Pacific & Ngaba Mbai-Akem Gabriella Magalie, 2023. "One Bad Turn Deserves Another: How Energy Production, Financial Instability, and Political Governance Crisis Sustain the Decline of FDI Inflows in the Central African Republic," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 831-853, June.
    4. Abban, Stanley, 2020. "Currency Union as a Panacea for ills in Africa: A New Institutional Framework and Theoretical Consideration," MPRA Paper 105459, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign direct investment; Trade; Gravity model; Integration;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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