FDI determinants in Mano River Union countries: micro and macro evidence

Abstract

This paper analyzes the main determinants of Foreign Direct Investment (FDI) in the member countries of Mano River Union: Côte d’Ivoire, Guinea, Liberia and Sierra Leone. We use both data at the firm level and at the country level - and employ OLS and ARDL techniques - in order to examine the differences and similarities in FDI drivers across these four countries. Our results show that international trade, investment in infrastructures and access to credit have a positive impact on FDI. While credit and trade have a similar influence across countries, the effect of investment is distinct across Mano River members, which raises political implications for policy coordination among states. We also conclude that policies aimed to boost human capital, as well as political and economic stability, are relevant, as they augment FDI inflows.