Does economic freedom improve FDI inflow in Sub-Saharan Africa?

Abstract This study aims to examine the effect of economic freedom on foreign direct investment (FDI) in Sub-Saharan Africa (SSA). This study focuses on the SSA region and takes into account the effect of the five components of the Fraser Institute's economic freedom index on FDI. To this end, we employed a panel data analysis in 37 countries over the period 2000-2018 by using two-stage least squares regression (2SLS) to deal with the endogeneity issue. We measure FDI by the net annual flow of inward FDI as a percentage of GDP in SSA. We find that economic freedom, legal system and security of property rights, freedom to trade internationally, and regulation of business, labour and credit markets encourage FDI flow in SSA. However, the size of government and sound money have positive sign but it is insignificant. The results are robust when we replaced the dependent variable FDI inflow with FDI inflow per capita. JEL classifications : P16, O43, F21, F23, O55,