Causes of Financial FDI Inflows into Sub-Saharan Africa (SSA): Evidence from Ghana

The main aim of this article is to examine the factors that influence the inflow of financial foreign direct investment (FDI) into SSA and to understand foreign investors’ perceptions of the role of institutional factors in facilitating financial FDI inflows and the extent to which the post reform business environment has been successful in attracting financial FDI inflows into SSA. An in-depth qualitative study was adopted for the research. Using two financial multinational corporations as case studies, the environmental factors that influenced their decision to choose Ghana as an investment destination are examined, as well as the institutional and regulatory factors that affect their current operations and future investment decisions

Does Aid Mitigate External Shocks?

The authors investigate the role of aid in mitigating the adverse effects of commodity export price shocks on growth in commodity-dependent countries. Using a large cross-country dataset, they find that negative shocks matter for short-term growth, while the ex ante risk of shocks does not seem to matter. They also find that both the level of aid and the flexibility of the exchange rate substantially lower the adverse growth effect of shocks. While the mitigating effect of aid is significant in both countries with pegs and countries with floats, the effect seems to be smaller for the latter, suggesting that aid and exchange rate flexibility are partly substitutes. They investigate whether aid has historically been targeted at shock-prone countries, but find no evidence that this is the case. This suggests that donors could increase aid effectiveness by redirecting aid toward countries with a high incidence of commodity export price shocks. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.