This paper investigates the impact of trade openness on domestic investment in selected Sub-Saharan African countries. The study uses panel data of 19 African countries covering the study period 1980-2020. This research uses as a baseline model the pooled Ordinary Least Square (OLS) and fixed effects (FE) with robust standards errors and assuming an AR(1) disturbances. Further, we estimated the fixed effects with country specific effects assuming AR(1) disturbances and adjusted for autocorrelation, and finally, we used the random effects with instrumental variables and the Generalized Method of Moments (GMM) to deal with endogeneity issues in our data. The empirical findings give evidence of a positive impact of trade openness on domestic investment in Africa. Regarding our control variables, the research concludes on the one hand, that the weak development of the credit sector in Africa does not encourage domestic investment and on the other hand, it is argued that the size of population does not improve the domestic investment in Africa.
Cite this paper
Nyinawumuntu, E. , Makala, U. E. and Han, F. (2022). Impact of Trade Openness on Domestic Investment in Sub-Saharan Africa. Open Access Library Journal, 9, e9171. doi: http://dx.doi.org/10.4236/oalib.1109171.
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