Macroeconomic Determinants Of Private Investment In The Economic Community Of West African States (Ecowas)

This study investigates the impact of macroeconomic factors on private investment in the Economic Community of West African States (ECOWAS) sub-region of Africa during the period 1986-2006. The study employs panel data techniques of analysis covering 15 ECOWAS countries. The problem of endogeneity in model specification was addressed by constructing an alternative GMM estimator that combined the level and first difference specifications using lagged levels of variables as instruments. Empirical results indicated that macroeconomic instability hindered private investment in the ECOWAS. There is evidence that inappropriate macroeconomic policy Il!anagement (fundamentals-real exchange and interest rates) contributed significantly to the poor investment performance. In the same vein, external debts constrained private investment in this African sub-region. The study concludes that progress towards macroeconomic stability, reduction of external debts and increased government investment would playa major role in stimulating private investment in the sub-region.