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Abstract
The main objective of this study is to examine the influence of institutional quality on FDI inflows
in East African countries. Specifically, the study seeks to establish whether control of corruption,
government effectiveness, regulatory quality, voice, and accountability have any significant positive
impact on FDI. The time series data covering a period of 19 years (2002-2021) was used and it was
collected from different sources such as the Fraser Institute, UNCTAD, and the World Bank. The
study population consisted of five East African countries, namely Tanzania, Kenya, Rwanda,
Burundi, and Uganda. The random effect panel regression model was employed to capture the
causal links among the variables of interest. The model was vindicated to be more appropriate by
the results of the Hausman test. The results indicated that government effectiveness and regulatory
quality have a significant positive impact on FDI inflow in East Africa. Voice and accountability as
well as control of corruption, were reported to be insignificant. On the basis of the study findings, it
is highly recommended that East African countries should take the following measures to enhance
FDI inflows. Firstly, governments should strengthen anti-corruption measures by enacting
comprehensive laws and establishing specialized agencies to curb corruption, even if the variable
was not found to be significant. Secondly, they should focus on improving regulatory quality
through streamlined procedures and transparent frameworks. Thirdly, they should enhance voice
and accountability mechanisms, including freedom of expression. Lastly, governments should
prioritize measures to enhance government effectiveness, such as capacity building and
international cooperation. This can create an attractive investment environment and drive
sustainable development in the region.
Keywords
FDI inflows
Institutional quality
Citation
Kivyiro, P. (2026), "Institutional Quality and Its Impact on FDI Inflows in East Africa: Panel Data Analysis", The African Journal of Finance and Management, Volume 16 Issue 1 , 0856-6372.
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