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FDI and Trade Policy Openness in Sub-Saharan Africa

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Abstract

Trade openness is an important determinant of Foreign Direct Investment (FDI) inflows into Sub-Saharan Africa (SSA). Consequently, studies have examined the relationship between FDI inflows and trade openness. This study develops a new measure of trade openness to re-examine the relationship between FDI inflows and trade policy openness using principal component analysis. This new measure captures the ease of trading activities and trade tariffs. Dynamic panel estimation technique was employed to analyze the relationship between trade policy openness and FDI inflows in SSA countries. The results indicate that an open economy attracts FDI. The study recommends efforts at reducing cost of trade.

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Correspondence to Godfred William Cantah.

APPENDIX

APPENDIX

Table A1

Table A1 Principal component analysis for trade openness

Table A2

Table A2 Openness to trade (Average) and ranking in SSA 2004–2012

Table A3

Table A3 Descriptive statistics

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Cantah, G., Brafu-Insaidoo, G., Wiafe, E. et al. FDI and Trade Policy Openness in Sub-Saharan Africa. Eastern Econ J 44, 97–116 (2018). https://doi.org/10.1057/eej.2016.9

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