FDI and Trade Openness: The Case of Emerging African Economies

Sa？etak The primary objective of this study was to examine the effect of trade openness of foreign direct investment using a panel of nine African countries, over the period 2009 -2016. We analyzed our data using the panel data method. Building on from the new growth theories, the results from the random effects model show that trade openness positively influences inward FDI although the relationship is only significant at 10%. Other FDI determinants that emerged were real exchange rate which was positive and very significant, while the lag of FDI was positive and significant at 5%; capital openness was positive but insignificant. In light of these findings, we therefore recommend that host countries remove trade tariffs and reduce taxation rates for multinational corporations that deter foreign investment. Further to this, they should ensure that their investment and macroeconomic policies are suitable to ensure capital accumulation, which will spur productivity and increase employment