Examining the Impact of Institutional Quality and Exchange Rate Volatility on FDI Inflows and Economic Growth in Somalia: A Systematic Literature Review Analysis Under Prisma Guidelines

This study explores the complex effects of institutional quality and exchange rate volatility on foreign direct investment inflows into Somalia. Following the PRISMA guidelines, a systematic literature review (SLR) was carried out using the SCOPUS database. The research focused on peer-reviewed publications from 2010 to 2024, resulting in the selection of 35 studies. The review shows that exchange rate volatility significantly harms foreign direct investment in Somalia; for instance, a 1% increase in exchange rate volatility leads to a 0.11% decrease in foreign direct investment over the long term, with a disequilibrium adjustment rate of 68.9%. Conversely, the review also indicates that the quality of public sector institutions, especially economic institutions, is a key factor in attracting FDI and promoting economic growth in Somalia. This study recommends a comprehensive and multifaceted approach that combines exchange rate stability with improvements in institutional quality to better attract foreign investors. Despite its contributions, this research emphasizes the need for further studies beyond SCOPUS-indexed articles, as while these sources offer valuable insights, they may not fully capture the empirical relationship between the variables studied.