The Effect of Foreign Direct Investment on Trade Balance: The Case of Sub Saharan Africa
No Thumbnail Available
Date
2006-07
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
Economists usually consider that FDI affects import share and export share
positively. But the nature of FDI flow varies across regions there by having
different impacts on the region under study.
This paper examined the impact of FDI on trade balance and its components
(export and import) for sub saharan africa region . This paper empirically proved
that FDI affects import share and export share positively and at a statistically
significant level. The results from cross sectional and panel data regression
reveal that the impact of FDI up on trade share, import share and export share is
strong . Almost all the regression results indicate that FDI affects these variables
at a 1 % significance level. However the magnitude of FDI in import share is
consistently higher than that of export share; indicating that the net impact of FDI
on trade balance is negative.
moreover this paper proved that import tax does not affect import share at a
statistically significant level in the case of Sub Saharan Africa. This may be due
to the fact that most of sub Saharan Africa imports are structural and do not
respond sensitively to price increment
Description
Keywords
Direct investment on trade balance, The case of Sub-Saharan Africa, The Effect of Foreign