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The Determinants of Foreign Direct Investment and Their Impact on Growth: Panel Data Analysis for AMU Countries

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  • Soumia Zenasni

    (Department of Economics - Université Aboubekr Belkaid - University of Belkaïd Abou Bekr [Tlemcen])

  • Abderrezzak Benhabib

Abstract

The purpose of this paper is to study the determinants of foreign direct investment (FDI) and empirically examine their effects on the growth of the Arab Maghreb Union (AMU) countries. This relationship has largely been analyzed in the economic literature. The results are mixed, some of the theoretical and empirical studies have shown that there is no positive relationship between FDI and economic growth, while others have found that FDI affect positively and significantly the long-run economic growth. Indeed, AMU countries have developed in recent years, an economic policy aimed at promoting the development of their economy. In these economies, FDI is considered as a key factor towards progress in economic sectors. This type of external funding has shown an increasing trend over time; however, the achievements of AMU countries in attracting FDI are still low compared to their potential and their performance to attract more foreign investments. In this paper, we use a dynamic panel system GMM estimator to study the determinants and the growth effects of FDI in three Maghreb countries (Algeria, Morocco, and Tunisia) during the period 1980-2010. Our empirical investigation suggests that, under particular economic and financial conditions, such as the adoption of an export promotion trade regime, restoring international competitiveness and diversification of exports, foreign direct investment affects positively the growth rate in the long run and improves the economic situation in AMU countries.

Suggested Citation

  • Soumia Zenasni & Abderrezzak Benhabib, 2013. "The Determinants of Foreign Direct Investment and Their Impact on Growth: Panel Data Analysis for AMU Countries," Post-Print hal-00817626, HAL.
    • Handle: RePEc:hal:journl:hal-00817626
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    Cited by:

    1. Ebenezer Bugri Anarfo & Abel Mawuko Agoba & Robert Abebreseh, 2017. "Foreign Direct Investment in Ghana: The Role of Infrastructural Development and Natural Resources," African Development Review, African Development Bank, vol. 29(4), pages 575-588, December.
    2. Benjamin U. Onah, 2022. "Financial Integration and Economic Performance: Comparative Evidence from SADC and ECOWAS Regions," The American Economist, Sage Publications, vol. 67(2), pages 226-240, October.
    3. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    4. Barkauskaite Aida & Naraskeviciute Violeta, 2016. "Foreign Direct Investment Impact on Economic Indicators of the Baltic Countries," Economics and Business, Sciendo, vol. 28(1), pages 61-67, April.

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