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Working Paper 254 - Exchange Rate Policies and FDI Flow in WAMZ


Foreign Direct Investment (FDI) is a main source of much desired capital flow as it is capable of facilitating technological spillovers, job creation and improves managerial skills and productivity in recipient countries (Blomstrom and Kokko, 1997; Jensen, 2003). Experts argue that FDI has the ability to argument the two gaps as identified in the literature vis-à-vis: the savings gap and the foreign exchange gap. More importantly, the desired savings to meet up with the desired investment is a mirage to most sub-Saharan African countries and this calls attention for external capital inflow to argument this short fall. Now, because the benefits of FDI are enormous, efforts geared towards attracting FDI have become one of the main aspects of growth and development policies in most economies (Jensen, 2003).

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