The drivers of investment and savings rates: An exploratory note

This note explores the literature on the determinants of foreign direct investment and domestic savings. With respect to foreign direct investment, it argues that institutional quality is the key driver of the type of investment that is necessary for structural transformation. With respect to domestic savings, focusing on sub-Saharan Africa, which lags behind other regions in savings rates, it suggests that there needs to be a stronger emphasis on long-term capital needs of the region. Policymakers can support the growth of pension and capital markets and the fintech sector through appropriate reforms and through re-orienting sovereign wealth funds towards more developmental purposes.