interest bearing liabilities of the financial intermediaries) divided by GDP. Source: World

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By Justice Joel Kamote

FOREIGN DIRECT INVESTMENT AND THE GROWTH OF AFRICAN ECONOMIES:

Determinants, the Role Played by Local Financial Markets and Labor Skills

Data Appendix

A.1.1 Countries in the Sample

List: Nigeria and Ghana (West Africa); Tunisia, Morocco and Egypt (North Africa); Tanzania, Kenya, Uganda, Mozambique (East Africa); South Africa, Mauritius and Botswana (Southern Africa) and Zambia and Angola (Central Africa).

A.1.2 Data Sources and Descriptions

Capitalization (SCAPT): Captures the size of the stock market, measures the average value of listed domestic shares on domestic exchanges in a year as a share of the size of the economy (the GDP). Source: World Bank Financial Structure Database.

Liquidity (LLY): Liquid liabilities of the financial system (currency plus demand and interest bearing liabilities of the financial intermediaries) divided by GDP. Source: World Bank Financial Structure Database.

Bank Credit (BANKCR): Credit by deposit money banks to the private sector as a share of GDP. Source: World Bank Financial Structure Database.

Commercial-Central Bank (BTOT): Ratio of commercial bank domestic assets divided by central bank plus commercial bank domestic assets. Source: World Bank Financial Structure Database.

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Determinants, the Role Played by Local Financial Markets and Labor Skills.

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Financial System Deposits (FDGDP): Demand, time and saving deposits in deposit money banks and other financial institutions as a share of GDP. Source: World Bank Financial Structure Database.

Foreign Direct Investment (FDI): Is the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of investor. It is the sum of equity capital, reinvestment earnings, other long-term capital, and short-term capital as shown in the balance of payments statistics. Gross FDI figures is the sum of the absolute value of inflows and outflows accounted in the balance of payments financial accounts. Source: UNTAD TNC Database.

Market size (Sizemils): Is total population of the host country. Source: World Bank Development Indicators (WDI CD-ROM 2005).

Government consumption as a percentage of GDP (GCE): Is government consumption as a ration of a country s GDP Source: World Bank Development Indicators (WDI CD-ROM 2005).

Life schooling (lschol) Is the average number of years spent from Primary to tertiary levels. Source: UNESCO Institute for Statistics.

Telephone mainlines (TEL): Is the average number of telephone mainline subscribers per a 1000. Source: World Bank Development Indicators (WDI CD-ROM 2005).

Industry value added as a percentage of GDP (INDVAD). It comprises value added in mining, manufacturing, construction, electricity, water and gas. Source: World Bank Development Indicators (WDI CD-ROM 2005).

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Openness to trade (Open): Is measured as the sum of exports and imports as a ratio of GDP. Computed measure, export and imports data come from World Bank Development Indicators (WDI CD-ROM 2005).

Corruption Perception Index (Corrupindex): a comparative assessment of countries' integrity performance. It is a composite index compiled using surveys of business people and assessment by country analysts from independent institutions.

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Determinants, the Role Played by Local Financial Markets and Labor Skills

Tables

Table 1:

FDI Inflows and Shares to Developing Regions, 1970-2003 (Million Dollars)

1970-1979 1980-1989 1990-1999 2000 2001 2002 2003 World 24124 93887 401028 1387953 817574 678751 560115 Developing Countries 6109 21356 121769 252459 219721 157612 172033 Africa 1066 2162 6187 8728 19616 11780 15033 North Africa 160 889 1864 2525 4916 2918 4434 Sub-Saharan Africa (SSA) 906 1273 4323 6202 14700 8862 10599

SSA Less South Africa

813 1259 3472 5314 7911 8105 9836

Latin America and Caribbean

3269 7438 44432 97537 88139 51358 49722

Asia and Pacific 1774 11756 71150 146195 111966 94474 107278 Source: UNCTAD/TNC database and World Bank Online Data

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Table 2:

Summary Statistics

Mean Std. Dev. Min. Value Max. Value

Foreign Direct Investment 381.6337 698.4869 -447.8007 6788.716

Market Size 27.61921 28.93284 1.016000 136.4610

Government Consumption 16.07579 6.471580 6.971638 45.26272

Schooling 9.799600 2.771076 3.680678 13.45612

Telephone 36.46683 50.41659 1.159882 285.2048

Industry Value Added 30.76834 11.81197 9.879856 66.97871

Trade Openness 67.07595 27.86473 21.00000 161.0000

Domestic Credit to Private Sector 31.14355 30.90984 2.076023 147.2256

Inflation 62.31318 38.80433 0.000000764 193.3022

Corruption Perception Index 3.600549 1.617569 0.630000 7.350000

Growth 1.759951 4.112306 -26.83826 15.55659

Finance 0.388720 0.234544 0.046302 0.963739

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3

Table 3:

Correlation Matrix: Model 1

1 2 3 4 5 6 7 8 9

1 Foreign Direct Investment 1

2 Market size (total population in Millions) 0.485 1

3 Life Schooling -0.014 0.002 1

4 Telephone(mainline subscribers per a1000) 0.058 -0.152 0.546 1

5 Industry Value Added (% GDP) 0.281 0.062 -0.209 0.082 1

6 Trade Openness 0.061 -0.341 -0.077 0.285 0.580 1

7 Domestic Credit to Private Sector 0.251 0.044 0.571 0.671 -0.034 -0.021 1

8 Inflation 0.356 0.008 -0.007 0.132 0.125 0.298 0.076 1

9 Institutional quality -0.245 -0.518 0.486 0.514 0.142 0.0199 0.498 -0.015 1

Table 4:

Correlation Matrix: Growth Model 1

growth FDI Schooling Gov. Cons. Tr. open Inflation Inst. quality Per capital GDP growth 1

Foreign Direct Investment -0.020 1

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Table 5:

Correlation Matrix: Growth Model 2

growth FDI Schooling Gov. Cons. Tr. open Inflation Finance Per capita GDP growth 1

Foreign Direct Investment -0.036 1

Life Schooling 0.073 0.079 1

Government Consumption -0.092 0.031 0.131 1

Trade Openness 0.116 -0.128 0.181 0.376 1

Inflation 0.179 0.185 0.170 0.003 0.152 1

Finance 0.022 0.174 0.392 -0.033 0.209 0.216 1

Note: The indicator of financial development used is the Liquid Liabilities of the Financial System. Liquid liabilities is the broadest measure of the financial intermediation and include three types of financial institutions: Central Bank, Deposit Money Banks, and other financial institutions. Alfaro et. Al. (2003) uses the same indicator.

Table 6:

Model 1: Foreign Direct Investment and Country Attractiveness Dependent Variable: Foreign Direct Investment

Independent Variables Coefficient Std. Error t-statistic P-value

Constant -341.518 _56.663 _-6.027 _0.0000**

Sizemls (Market Size) 10.011 _1.150 _8.704 _0.0000**

Lschol (Life Schooling) 3.150 _4.568 _0.689 _0.491

Telephone -0.639 _0.305 _-2.094 _0.037*

INDVAD (Industry Value Added (% GDP)) 11.125 _1.618 _6.876 _0.0000**

Open (Trade Openness) -1.139 _0.356 _-3.201 _0.002**

DCPS (Domestic Credit to Private Sector) 4.758 _0.994 _4.788 _0.0000**

CPI (Inflation) 1.974 _0.369 _5.353 _0.0000**

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5

Number of Observations 246

Adj. R2 0.44

Redundant Fixed Effects Tests

Cross-section F _4.1366 P-value _0.0000

* Significant at 5 percent ** Significant at 1 percent

Table 7:

Growth Model 1: Growth, Foreign Direct Investment and Labor Skills Dependent Variable: Per capita Growth rate

Independent Variables Coefficient Std. Error t-statistic P-value

Constant 2.081904 0.715246 2.910753 0.0000** Government Consumption -0.165832 0.036854 -4.499687 0.0000** Trade Openness 0.016773 0.007569 2.215968 0.0277* Institutional quality 0.419610 0.133019 3.154512 0.0018** Inflation 0.002084 0.003896 0.534980 0.5932 Schooling -0.104599 0.085281 -1.226512 0.2213 FDI1 -85.36984 36.53105 -2.336912 0.0203* FDI*Schooling 10.50240 4.030039 2.606030 0.0098** Number of Observation 239 Adj. R2 0.52

Redundant Fixed Effects Tests

Cross-section F _6.0071

P-value 0.0000

1

This variable enters as a ratio of FDI to GDP * Significant at 5 percent

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Table 8:

Growth Model 2: Growth, Foreign Direct Investment and Finance Dependent Variable: Per capita Growth rate

Independent Variables 1 Panel 2 Panel 3 Panel 4 Panel 5 Panel 6 Panel Constant -2.9547 (0.0343)* -0.0936 (0.9333) -1.6336 (0.1281) 4.4308 (0.0019)** -1.1589 (0.3103) -0.6365 (0.5860) FDI1 15.2323 (0.2232) 17.8841 (0.1572) 21.7993 (0.0370)* -38.8376 (0.2389) 21.3315 (0.0567) 21.2811 (0.0676)

Stock Market Capitalization (SCAPT) -1.2642

(0.0059)**

Liquid Liabilities (LLY) -1.5391

(0.1993)

Bank Credit (BANKCR) -3.8512

(0.0084)**

Commercial & Central Bank Domestic Assets (BTOT) -0.4856

(0.7818)

Deposit Money Bank Assets, (DBAGDP) -3.1282

(0.0143)*

Financial System Deposits(FDGDP) -2.0954

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7 (0.1544) (0.0006)** (0.0004)** (0.0000)** (0.0001)** (0.0003)** Trade Openness 0.0290 (0.0000)** 0.0359 (0.0000)** 0.0334 (0.0000)** 0.0217 (0.0130)* 0.0328 (0.0000)** 0.0326 (0.0000)** Inflation 0.0064 (0.4051) 0.0102 (0.1217) 0.0135 (0.0253) 0.0050 (0.3745) 0.0138 (0.0212) 0.0114 (0.0702)

Schooling 0.2829 (0.0013) 0.1221 (0.1882) 0.2641 (0.0087) -0.0130 (0.9108) 0.2544 (0.0132) 0.1829 (0.0645) Number of Observations Adj. R2

Redundant Fixed Effects Tests

Cross-section F

Cross-section Chi square

140 0.16 1.1989 (0.2983) 13.1238 (0.2168) 222 0.11 5.3836 (0.0000) 61.6032 (0.0000) 217 0.13 4.8786 (0.0000) 56.4603 (0.0000) 209 0.16 2.5454 (0.0051) 28.7303 (0.0025) 222 0.12 4.8565 (0.0000) 56.2729 (0.0000) 222 0.10 5.5298 (0.0000) 63.0592 (0.0000) 1

This variable enters as a ratio of FDI to GDP

Note: P-values are in parentheses below estimated coefficient values * Significant at 5 percent

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