GLOBAL FINANCIAL CRISES AND CAPITAL FLOWS
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GLOBAL FINANCIAL CRISES AND CAPITAL FLOWS
ABSTRACT
The influence of foreign capital inflows on sub-Saharan African economic growth, with a focus on West African Monetary Zone (WAMZ) member nations, was investigated using panel data regression models and the Hausman test.
The study’s findings demonstrated a positive and significant association between capital flows and economic growth rates in the West African Monetary Zone. Foreign direct investment (FDI) as a capital flows variable has an inverse relationship with regional economic growth, whereas other capital flows variables such as foreign private investment (PPI), overseas development assistance (ODA), and economic migrant remittances are positive and statistically significant in the long run.
To summarise, the majority of investment inflows into Sub-Saharan Africa were based on speculation directed at non-priority areas of the economy and channelled into enterprises with short gestation periods.
Their impact is only felt in the short term, and because the money are returned after profits are earned, they fail to have the expected long-term impact.
As a result, the report advises that the economies of the West African Monetary Zone (WAMZ) make conscious efforts to implement investor-friendly policies that will stimulate and attract additional capital inflows, thereby creating a conductive and enabling environment.
Basic infrastructure, such as good roads, reliable electricity, and security, must be deemed adequate. Again, there is a need to reduce speculative firms and invest in the actual sectors of the economy.
To limit the level of capital flight, inflows should be linked to specific, relevant, and purposeful projects. This will help to establish long-term employment prospects.
Finally, there is a requirement for prudence and accountability in managing accruals from official capital inflows and transfers. Such films are supposed to be channelled into productive projects by governments in power rather than frivolous spending.
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