Positioning Sub-saharan Africa on the Global Economy: evaluating the effect of economic crisis on foreign direct investment and foreign aid inflowsto the region
Abstract/ Overview
The advent of global economic crisis which affected most of developed economies in North
America and Europe has had trickle-down effects on Sub-Saharan Africa. This effect has been
characterized by falling exports demand, foreign capital inflows in terms of foreign direct
investment (FDI), foreign aid inflows and remittances from African immigrants working in the
ICs. The study investigates the effects of economic crisis on FDI and the foreign aid inflows in
four countries which include Botswana, Kenya, Malawi and Mozambique. Panel data was used
for analysis with OLS, Random Effects and Maximum Likelihood Estimation from 1990-2010
was conducted. The results show that contrary to the expectation that economic crisis had
negative effects on FDI inflows in SSA it was the other way round. Economic crisis has a positive
impact on FDI inflows. This may because of natural resource oriented FDIs in Mozambique and
Botswana and low integration in world markets for Kenya and Malawi (Most FDI are primary
resource base such as agriculture).
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- Department of Economics [103]