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Long Run Relationship between IFDI and Domestic Investment in GCC Countries

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  • Ghassan, Hassan B.
  • Alhajhoj, Hassan R.

Abstract

The paper aims to examine the relationship, whether complementary or substitutive, between inward FDI and gross domestic investment in the six GCC countries using cointegration techniques and fully modified GMM estimation. Based on the panel data, the empirical evidence implies that in Qatar, Oman, the UAE and Saudi Arabia, the inward FDI has positive short-run and long-run effects on the domestic investment. For Bahrain, such a complementary relationship exists only in the short-run. For the majority of GCC countries, the long-run elasticities have large magnitude compared to the short-run counterparts, justifying more attraction policy of the IFDI in the future. The gap in the privatization process of public enterprises in the GCC explains in a large extent their heterogeneity in terms of elasticities and spillovers effects.

Suggested Citation

  • Ghassan, Hassan B. & Alhajhoj, Hassan R., 2015. "Long Run Relationship between IFDI and Domestic Investment in GCC Countries," MPRA Paper 72668, University Library of Munich, Germany, revised Jun 2016.
    • Handle: RePEc:pra:mprapa:72668
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    2. Farah Durani & Waqar Ameer & Muhammad Saeed Meo & Maizaitulaidawati Md Husin, 2021. "Relationship Between Outward Foreign Direct Investment and Domestic Investment: Evidence from GCC Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(4), pages 278-291, April.

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    More about this item

    Keywords

    FDI; Domestic investment; GMM; Long-run Elasticities; GCC.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F2 - International Economics - - International Factor Movements and International Business

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