The Moderating Effect of Economic Growth on the Relationship between Economic Integration and Foreign Direct Investment in the East African Community

摘要

This paper investigates the moderating effect of economic growth on therelationship between economic integration and foreign direct investment in theEast African Community. Developing countries rely on foreign direct investment(FDI) to supplement their low levels of national savings in order to promoteeconomic development. However, low levels of FDI are still a big concern forpoor countries. Regional integration is often considered a means to improvemember countries’ attractiveness to FDI. From the available anecdotal evidence,the East African region ranks as one of the poorest recipients of FDI in the world.Finance literature records that economic growth as an indicator of the investorpotential rate of return as well as population purchasing power catalyzes the rateof foreign direct investment attraction. The research employed an explanatoryresearch design. East African Community was the unit of analysis involvingKenya, Tanzania, Uganda, Rwanda and Burundi. Empirical data analysisemployed hierarchical regression analysis. The quarterly time series data usedspanned the period 2001 – 2015. The study establishes that economic growthenhances the capacity of economic integration to attract FDI into a region.