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Financial development, globalisation and foreign direct investment nexus: an empirical study from Africa

Author

Listed:
  • Khadijah Iddrisu

    (Simon Diedong Dombo University of Business and Integrated Development Studies)

  • Joshua Yindenaba Abor

    (University of Ghana Business School)

  • Kannyiri T. Banyen

    (Simon Diedong Dombo University of Business and Integrated Development Studies)

Abstract

This study examined the relationship between financial development, globalisation, and foreign direct investment (FDI) in 49 African countries from 1997 to 2020. Using two-stage least squares, the findings revealed that both financial development and globalisation attract FDI in Africa. However, when financial development was broken down into financial institution development (FII) and financial market development (FMD), only FMD attracted FDI inflows. The findings also show that globalisation form synergy with financial development to further promote FDI inflows. In terms of the components of globalisation, political globalisation synergized with the financial development index, while economic globalisation attracts more FDI than other components. Policymakers should focus on developing stock exchanges, banking systems, and insurance industries, reducing trade barriers, and enhancing access to global markets.

Suggested Citation

  • Khadijah Iddrisu & Joshua Yindenaba Abor & Kannyiri T. Banyen, 2024. "Financial development, globalisation and foreign direct investment nexus: an empirical study from Africa," SN Business & Economics, Springer, vol. 4(6), pages 1-31, June.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:6:d:10.1007_s43546-024-00667-w
    DOI: 10.1007/s43546-024-00667-w
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    More about this item

    Keywords

    Globalisation; Financial development; Africa; 2SLS; FDI;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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