This study aims to assess the role of absorptive capacity in the relationship between immigration and domestic innovation in sending countries using five average period data points from a sample of 35 African countries over the period 1995-2019. The results based on panel quantile regression with nonadditive fixed effects support the brain drain hypothesis, implying that immigration has negative heterogeneous effects on the innovation performance of sending countries. Our findings also revealed that absorptive capacity mitigates the negative effects of immigration when countries’ absorptive capacity reaches a certain threshold. These results suggest that strengthening the quality of institutions and physical infrastructures could mitigate the brain drain effect of immigration in Africa.

Purpose: This paper aims to examine the response of monetary policy to financial instability in the West African Economic and Monetary Union.Design/methodology/approach: Through annual aggregated data from 1970 to 2019, the empirical strategy is based on the Markov regime-switching model with fixed probabilities.Findings: The results revealed that the monetary policy of the central bank of the West African Economic and Monetary Union is characterized by two regimes (calm and distress) with respect to the trend of financial stability. The authors also found that the occurrence of the calm regime was likely greater than that of the distress regime. In addition, the calm regime is longer than the distress regime. The authors finally revealed that the central bank reacts to financial instability risk by increasing its short-term interest rate when financial instability reaches a threshold.Research limitations/implications: The limitation of this study is the unavailability of monthly or quarterly data that are more suitable for the methodological approach adopted.Originality/value: This study is the one to estimate the response of the Central Bank of West African Countries to financial stress using a novel approach based on the Markov-Switching regression.