Foreign Capital Flows and Industrial Output in Selected African Countries

African nations grapple with limited domestic resources due to low tax revenues and savings levels. This necessitated the need to examine the cause of the negative implications and then enhance the positive areas of the impact. The study aims to investigate how institutional quality moderates the impact of foreign financial flows on industrial output, focusing on these top recipients of foreign flows in Africa from ۱۹۹۲ to ۲۰۲۲. We use a panel autoregressive distributed lag modeling approach, which is relevant in evaluating large cross-sections and periods. This allows us to account for both short and long-run dynamics as well as the interaction of capital flows variables and institutional quality. We find that institutional quality has a mediating positive impact on foreign inflows to the industrial performance of the selected countries. For instance, the PMG result for the model without interaction shows that an increase in FDI will lead to a ۳.۴۷۳unit increase in industrial output in the long run. The PMG model with interactions reveals that FDI and FPI exert ۱۳.۰۴unit and ۱۲۵.۴unit impact on industrial output. However, the impact appears to vary based on short and long-run dynamics. The ECM for both models without and with interactions is negatively significant at -۰.۲۴۶% and -۰.۲۴۱%. We equally documented the dynamics of the relationship using country-specific analysis and found similar outcomes, exhibiting mixed outcomes across both short and long-run periods. The findings show that foreign capital flows perform better in an environment of quality institutions with a higher predictive power in the long run.

کلیدواژه ها:

Foreign direct investment ، Foreign Financial Flows ، Foreign Portfolio Investment ، Industrialization ، Institutional Quality ، Official Development Assistance