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Impact of EU- FDI on Economic Growth in Middle Eastern Countries

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  • M.M. Metwally

Abstract

This paper develops a simultaneous equations model to test the process of interaction between foreign direct investment, exports and economic growth in three Middle Eastern countries: Egypt, Jordan, Oman, and test for any possible feedback effects. Most of the FDI in these countries flows from the EU. The simultaneous equations model results suggest that higher rates of economic growth result in a greater inflow of foreign capital. The regression results also suggest that interest rate differentials exert a much stronger effect than economic growth on the attraction of foreign capital in the case of Egypt. However, this variable does not seem to play a significant role in the case of Oman. Moreover, the simultaneous equations model results suggest that there is a feedback effect in the relationship between economic growth and capital inflow in all sample countries. A greater inflow of foreign capital leads to growth in the exports of good and services. The expansion in exports leads to growth in GNP, which in turn, encourages the attraction of more foreign capital.

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  • M.M. Metwally, 2004. "Impact of EU- FDI on Economic Growth in Middle Eastern Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 121-132.
    • Handle: RePEc:ers:journl:v:vii:y:2004:i:1-2:p:121-132
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    1. El. Thalassinos & Th. Kiriazidis, 2003. "Degrees Of Integration In International Portfolio Diversification: Effective Systemic Risk," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 119-130, January -.
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    2. Bhatt, P.R., 2013. "Causal Relationship between Exports, FDI and Income: The case of Vietnam," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 161-172.
    3. Abdessalem GOUIDER & Ridha NOUIRA, 2014. "The Impact of Misalignment on FDI in the Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 784-800.
    4. Basem M. Lozi* & Mamoun Shakatreh, 2019. "The Impact of International Capital Flows on Jordan’s Economic Growth," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 5(9), pages 214-220, 09-2019.
    5. Eunice Santos & Cristina I. Fernandes & João J. Ferreira & Carla Azevedo Lobo, 2021. "What Is the Impact of Informal Entrepreneurship on Venture Capital Flows?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 2032-2049, December.
    6. Syed Tehseen Jawaid & Syed Ali Raza & Khalid Mustafa & Mohd Zaini Abd Karim, 2016. "Does Inward Foreign Direct Investment Lead Export Performance in Pakistan?," Global Business Review, International Management Institute, vol. 17(6), pages 1296-1313, December.
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    8. Mojtaba Hajian Heidary, 2022. "A system dynamics model of the impact of COVID-19 pandemic and foreign direct investment in the global supply chain," Future Business Journal, Springer, vol. 8(1), pages 1-9, December.
    9. Sayari, Naz & Sari, Ramazan & Hammoudeh, Shawkat, 2018. "The impact of value added components of GDP and FDI on economic freedom in Europe," Economic Systems, Elsevier, vol. 42(2), pages 282-294.
    10. Ana S. Trbovich & Jana Subotić & Jasna Matić, 2013. "Foreign Direct Investment As Export Facilitator In Serbia’S Apparel Industry," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 5-6, pages 339-353, August.
    11. Hussain Ali Bekhet, 2013. "Examining the Equilibrium Relationships between Foreign Direct Investment Inflows and Employment in Manufacturing and Services Sectors: Evidence from Malaysia," Journal of Social and Development Sciences, AMH International, vol. 4(1), pages 32-38.
    12. Jayanthakumaran, Kankesu & Lee, Shao-Wei, 2007. "An initial push for successful transition from import substitution to export-orientation in Taiwan and China: The FDI-led hypothesis," Economics Working Papers wp07-03, School of Economics, University of Wollongong, NSW, Australia.
    13. Ali Sadiq Mohommed BAGER & Bahr Kadhim MOHAMMED & Meshal Harbi ODAH, 2017. "Ridge Regression Analysis On The Influential Factors Of Fdi In Iraq," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 11(1), pages 19-25, November.

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