What Types of Capital Flows Help Improve International Risk Sharing?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Macroeconomic and institutional conditions: the drivers behind divestment of FDI in Sub-Saharan Africa

“…Following the neoclassical proposition, Sub-Saharan Africa (SSA) with relatively low capital per worker is expected to attract more foreign direct investment (FDI), to catch up with other regions of the world. However, there is high investment risk in SSA that tends to militate against capital flows; hence, the inflow of FDI has not been encouraging, and even characterized by sustained divestment in recent years (Osabutey and Okoro, 2015; Islamaj and Kose, 2021). The level of FDI in the region has, therefore, remained relatively low since 1980, which may take a long period of time to catch up with the levels in other developing regions of Asia and South America.…”