Regulatory Quality, Rule of Law and Foreign Direct Investment Inflows: Evidence from the Economic Community of West African States

Innocent Chile Nzeh; Uju Victoria  Okoli; Joan Nwamaka  Ozoh; Florence Ngozi  Ezenwob

doi:10.56225/ijfeb.v3i1.282

Authors

Innocent Chile Nzeh Department of Cooperative and Rural Development, University of Agriculture and Environmental Sciences, Umuagwo, Imo State
Uju Victoria Okoli Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State
Joan Nwamaka Ozoh Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State
Florence Ngozi Ezenwob Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State

DOI:

https://doi.org/10.56225/ijfeb.v3i1.282

Keywords:

Foreign Direct Investment inflows, Institutional quality, Gross Domestic Product, Panel ARDL, Regulatory quality, ECOWAS

Abstract

In literature, the role of institutions in stimulating FDI inflows has been documented. This study examined the contributions of two institutional-quality variables, regulatory quality and the rule of law, in attracting FDI in the Economic Community of West African States (ECOWAS). The study used an annual series covering the period from 2000 to 2020 using three different estimation techniques: the panel ARDL, the panel FMOLS, and the panel DOLS. Findings reveal that while the rule of law had a negative and significant impact on FDI inflows under the panel ARDL and FMOLS, the impact of regulatory quality was negative and significant under the panel ARDL and DOLS. The short-run ARDL results revealed that only the population growth rate positively and significantly impacted FDI inflows. However, in the long run, findings showed that while the population growth rate had a positive and significant impact on FDI inflows under the ARDL, the impact of GDP was positive and significant in all the models. The exchange rate was also found to negatively and significantly impact FDI inflows in all the models. The study consequently recommends building strong institutions through collaboration among the member countries while improving human capital and economic growth.

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