The African Education and Business Research Institute, Inc.
Abstract
In the light of dampening effects of the global financial melt-down, the paper examines
the trends in financial flows, particularly foreign direct investment (FDI) and the possible
effects of the global financial crisis and macroeconomic fluctuations on economic
development in Africa. The paper employs simple panel data approach which links panel
data methodology that allows for individual heterogeneity, while the method of
estimation is the Fixed and Random Effects regression. The method of panel VAR is also
used in the paper with a view to capturing the dynamic effects of FDI inflows for policy
analysis using the impulse response functions. The number of countries (27) included in
the paper and the period of estimation, 1987-2007, are informed by data availability.
With some suggestions on the direction of policy to stimulate increased financial flows,
the paper opines that there is the need for comparative dynamics of African economies
in order to return to the path of sustainable growth and development
