The effects of international financial inflows on economic complexity in Africa: does institutional quality play a moderation role?

ABSTRACT

We investigated the effects of international financial inflows (remittances, foreign direct investment and foreign aid) on economic complexity in Africa and the moderation role of institutional quality. We used the dynamic system GMM framework for a panel of 31 African countries over the period 2010–2020. We find that these international financial inflows are significant drivers of economic complexity in Africa, and that institutional quality is significantly moderating and enhancing their effects on economic complexity. Among other recommendations, we encourage policymakers in Africa to continually create an enabling environment to attract these financial inflows in order to promote sustainable investment and economic growth.

KEYWORDS:

• Economic complexity
• international financial flows
• institutional quality
• system GMM regression

JEL CLASSIFICATION:

• O14
• L83
• N20
• C23

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.