Foreign Direct Investment and Inflation Variability: Evidence from ECOWAS Countries

Mutiu Oyinlola, Oluwatosin Adeniyi & Ibrahim Raheem
University of Ibadan

Kazeem Ajide
University of Lagos

 

Abstract

In this paper, we examined the impact of infl ation variability on foreign direct investment (FDI) infl ows to selected ECOWAS countries. While using GARCH (1,1) to measure infl ation variability, it was found that there is persistence in infl ation dynamics in these selected countries. In all, estimates from both OLS and SYS-GMM suggested that infl ation variability appeared to encourage FDI infl ows. Th is seemingly counter intuitive fi nding, however, could plausibly be linked to the infl ationary
experiences in these countries. More precisely, since infl ation variability is “anticipated” and thereby not so “shocking”, FDI infl ows may not be deterred. Overall, these results remained valid amid robustness checks. Hence, we documented few relatable policy implications.Download the full article