Governance and foreign direct investment: is the low and middle income Africa region different?

This paper examines the effect of political governance, economic governance and institutional governance on FDI inflows on a sample of 32 African countries: 15 low income countries and 17 middle income countries, over the period of 1996-2019. Our empirical study used both aggregated analysis and the system generalised method of moments (System-GMM). The aggregate approach consists to use three composite indicators [Political Governance encompassing political stability (PS) and voice and accountability (VA)], economic governance [representing by government effectiveness (GE) and regulatory quality (RQ)] and institutional governance [including the control of corruption (CC), the rule of law (RL)]. Our findings show that overall governance indicators attract FDI inflows in African and its sub-regions. Therefore, improvements in political governance, economic governance and institutional governance are deterministic conditions in the attractiveness of FDI in African economies.