Journal of Economics and Development Studies

Foreign Direct Investments, Financial Development, and Global Value Chains in Sub-Saharan Africa
KAMALAN Angbonon Eugène, AYMAR Geraud Allangba

Abstract
This article analyzes the effects of financial development and Foreign Direct Investment (FDI) on participation in Global Value Chains (GVCs) on the one hand, and examines the specific effects on different components of the Global Value Chains on the other hand, for 34 Sub-Saharan African countries. Using a GMM modeling approach on data from UNCTAD (Eora) and the World Bank (WDI) covering the period 1996-2018, we estimate these different relationships. Our results indicate a negative and significant effect of FDI on Global Value Chains and their components. Financial development, on the other hand, shows a positive and significant effect. These findings suggest that FDI tends to deteriorate participation in value chains due to the lack of technology and knowledge transfer contained in FDI. For financial development, our results indicate that an increase in loans to households, accompanied by a rise in the money supply, represents a major asset for participation in the value chain.

Full Text: PDF     DOI: 10.15640/jeds.v12n1a7