Physical infrastructures and attractiveness of private capital in Sub-Saharan African countries

Abstract

Physical infrastructures are a set of interconnected structural elements whose function is to participate in attracting capital flows in order for the economy to function efficiently. They transfer capital flows that are able to ensure growth and stability. They also constitute a major challenge for growth and development. We have attempted in this paper to study the influence of physical infrastructures and financial development on foreign direct investments (FDIs) in the context of Sub-Saharan African (SSA) countries by combining two theoretical approaches (the paradox of Lucas and the external-internal factors), and by integrating the correlation between the components of capital flows. Our regressions show the importance of nonlinear effects in the explanation of the determinants of private capital. This analysis also emphasises the more important role physical infrastructures play in attracting FDIs despite perverse effects.