EXTERNAL DEBTS, FOREIGN DIRECT INVESTMENT (FDI) AND INSTITUTIONS IN ECOWAS COUNTRIES
Aduma Oko Aduma, Stephen Sofah and Muftau Olarinde
Volume 2 Issue 2
Abstract
This study examines the impact of institutions on external debt and foreign direct Investment in ECOWAS countries for a period of 10 years (2008-2018) covering 16 West African countries. The study adopts the System Generalized Method of Moments as a technique of data analysis. The study measured institutions by six proxies namely; Government effectiveness, Rule of Law, Control of corruption, Political stability, Regulatory quality and Voice and accountability. The results revealed that voice & accountability, control of corruption and political stability positively attract the influx of FDI, while government effectiveness significantly exerted a negative impact on FDI in ECOWAS sub region. On the other hand, a unit change in voice & accountability brought about decrease in external debts among ECOWAS sub region, while political stability and government effectiveness has significant positive impact on external debts while control of corruption has negative impact on external debt. To improve the flow of FDI into ECOWAS sub region, the study recommends better government control of corruption, reduction in administrative bottlenecks and multiplicity of government agencies which have led to unnecessary delays in implementation of government policies. Equally, the respect for the rule of law should be supreme. This implies that the constitution among various countries remains absolute and the rule of law is respected and observed. Keywords: External debts, FDI, Institutions, ECOWAS, System GMM
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