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Foreign Direct Investment, Financial Development and Economic Growth in North African Countries

Author

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  • Imen Mohamed Sghaier

    (Higher Institute of Business Administration of Sfax, University of Sfax, Tunisia)

Abstract

This paper examines the relationships between foreign direct investment (FDI), financial development and economic growth on a panel of four North African countries (Tunisia, Morocco, Algeria and Egypt), over a 5-year period from 1992 to 2016. Using the system Generalized Method of Moments (GMM) in a panel data analysis, we found that FDI has a positive effect on economic growth. We also found that financial development appears to be working as a complement to FDI and, that the effect of FDI is more pronounced in the presence of the financial development variable. The policy implications of this study appeared clear. Improvement efforts need to be driven by local-level reforms to ensure the development of domestic financial system in order to benefit more from the significant inflows of FDI.

Suggested Citation

  • Imen Mohamed Sghaier, 2018. "Foreign Direct Investment, Financial Development and Economic Growth in North African Countries," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 527-540, December.
    • Handle: RePEc:nwe:eajour:y:2018:i:4:p:527-540
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    Citations

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    Cited by:

    1. Amar Anwar & Ichiro Iwasaki, 2023. "The finance–growth nexus in the Middle East and Africa: A comparative meta‐analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4655-4683, October.
    2. Imen Mohamed Sghaier, 2020. "Does Financial Development Affect the Economic Growth Gains from Trade Openness?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 666-682, December.
    3. Clement Olalekan Olaniyi, 2022. "On the transmission mechanisms in the finance–growth nexus in Southern African countries: Does institution matter?," Economic Change and Restructuring, Springer, vol. 55(1), pages 153-191, February.
    4. Clement Olalekan Olaniyi & Sunday Idowu Oladeji, 2021. "Moderating the effect of institutional quality on the finance–growth nexus: insights from West African countries," Economic Change and Restructuring, Springer, vol. 54(1), pages 43-74, February.
    5. Louail Bilal & Zouita Mohamed Salah, 2021. "The relationship between foreign direct investment, financial development and growth economic in Next-11 Countries: a PMG/ARDL estimation," Management, Sciendo, vol. 25(1), pages 28-50, January.
    6. IWASAKI, Ichiro & ONO, Shigeki, 2023. "Economic Development and the Finance-Growth Nexus : A Meta-Analytic Approach," CEI Working Paper Series 2023-06, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    foreign direct investment; economic growth; financial development; panel data analysis;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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