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Foreign direct investment and domestic investment: Do oil sectors matter? Evidence from oil-exporting Gulf Cooperation Council economies

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  • Elheddad, Mohamed

Abstract

This article investigates the impact of sectoral foreign direct investment (FDI) on public and private domestic investment (DI) using a unique dataset of greenfield FDI inflows to six oil-exporting economies of the Gulf Cooperation Council (GCC) during 2003–2013. After controlling for some econometric issues and macroeconomic determinants of DI, there are two main findings. First, aggregate estimations show that FDI inflows contribute significantly to public DI but discourage private DI. Conversely, FDI outflows promote private domestic economic activities but negatively affect public DI. Second, disaggregated data illustrates that greenfield FDI inflows to the oil sector yield a significant and positive effect on public DI; a 1% increase in oil FDI leads to about a 0.6% improvement in public DI. Non-oil FDI has an ambiguous effect on DI. All the results are robust.

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  • Elheddad, Mohamed, 2019. "Foreign direct investment and domestic investment: Do oil sectors matter? Evidence from oil-exporting Gulf Cooperation Council economies," Journal of Economics and Business, Elsevier, vol. 103(C), pages 1-12.
    • Handle: RePEc:eee:jebusi:v:103:y:2019:i:c:p:1-12
    DOI: 10.1016/j.jeconbus.2018.11.001
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    3. Dogan, Eyup & Altinoz, Buket & Tzeremes, Panayiotis, 2020. "The analysis of ‘Financial Resource Curse’ hypothesis for developed countries: Evidence from asymmetric effects with quantile regression," Resources Policy, Elsevier, vol. 68(C).
    4. Xing Zhou & Quan Guo & Ming Zhang, 2021. "Impacts of OFDI on Host Country Energy Consumption and Home Country Energy Efficiency Based on a Belt and Road Perspective," Energies, MDPI, vol. 14(21), pages 1-25, November.
    5. Waqar Ameer & Helian Xu & Kazi Sohag & Syed Hasanat Shah, 2021. "Outflow FDI and Domestic Investment: Aggregated and Disaggregated Analysis," Sustainability, MDPI, vol. 13(13), pages 1-19, June.
    6. Asif, Muhammad & Khan, Khan Burhan & Anser, Muhammad Khalid & Nassani, Abdelmohsen A. & Abro, Muhammad Moinuddin Qazi & Zaman, Khalid, 2020. "Dynamic interaction between financial development and natural resources: Evaluating the ‘Resource curse’ hypothesis," Resources Policy, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    FDI; Public domestic investment; Private domestic investment; Panel data; Endogeneity; Oil; GCC;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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