Munich Personal RePEc Archive

FDI to Africa: The role of price stability and currency instability

Reinhart, Carmen and Rogoff, Kenneth (2002): FDI to Africa: The role of price stability and currency instability. Published in: B. Plesovic and N. Stern, Annual World Bank Conference on Development Economics 2002: The New Reform Agenda. Washington DC: The World Bank/Oxford University Press, (2002): pp. 247-282.

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_13872.pdf

Download (165kB) | Preview

Abstract

Africa lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining this outcome. Specifically, we document the incidence of inflationary episodes and currency crashes in order to compare countries within the region as well as to make comparisons with other regions. Furthermore, since monetary policy can range from very transparent to very opaque, we assess Africa’s track record with dual and parallel markets. We use the parallel market premia as an indicator of the degree of distortions and extent of transparency. Our findings, suggest that this is a promising line of inquiry because Africa does stand apart from other regions in this measure of transparency. We also discuss some of the fiscal underpinnings of Africa’s bouts with high inflation.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.