The African Business Review May-Jun 2014 | Page 40

data. However, this technique has been considered to exhibit
bias behaviour and endogeneity problems, thus, recent empirical
analysts tend not to base their policy recommendations on OLS
result only. Hence, we employ a more sophisticated technique:
Two Sate Least Square- Instrumental Variable Technique.

Result interpretation

Table 3 (see overleaf ) gives a summary statistics of the results

TAR model result[4]

Figure 1. Trends in FDI and growth in East
Africa.

Figure 2. Trends in FDI and growth in West
Africa.

Figure 3. Trends in FDI and growth in North
Africa.

40 | The African Business Review

This study empirically tests the influence of FSD on the FDIgrowth nexus by considering three FSD indicators[5]. The
indicators can be classified into three groups: High FSD countries
(60 percent and above); Medium FSD countries (40-50 percent)
and Low FSD countries (below 40 percent).

Algeria (LLY ), Y