An empirical analysis of the determinants of FDI in the WAEMU

Abstract

The objective of this work is to identify the determinants of FDI in WAEMU. However, despite the abundance of developed theoretical literature relating to FDI, there is no unified theoretical framework to reach a consensus on the definitive choice of variables that determine FDI. This is how these theoretical reflections have been supplemented by various empirical studies on foreign direct investment in order to specify the determinants specific to each region. The review of the empirical literature of the determinants of FDI in developing countries suggests that the determining factors of FDI are economic openness and market size, while corruption and political and economic risks constitute the main brakes. FDI inflows into developing countries (DCs). Inspired by this review, we built an econometric model in which are included variables of FDI attractiveness to WAEMU, which is estimated by the ordinary least squares estimator by the "stepwise regression" method. The econometric estimate conducted shows that the size of the market measured by GDP, and the lack of national savings are the main factors of attractiveness of FDI to WAEMU. We also note the lack of infrastructure that attracts some investors in the construction and public works sectors and other investor countries try to indebt the region to ensure their presence. This is why the foreign debt does not hinder MNCs from settling in the region

Keywords: FDI, determinants, investment, multinational firms

JEL Classification : F21, F23, O00

Paper type : Empirical research