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Policies and Variables affecting FDI: A Panel Data Analysis of North African Countries

Author

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  • Ahmed MUSABEH

    (Kadir Has University, Istanbul, Turkey)

  • Mehdi ZOUAOUI

    (Istanbul University, Department of International Relations, Istanbul, Turkey)

Abstract

North Africa region is one of the wealthiest areas due to its natural resources and strategic location. But, it is still fragile according to economic indicators, especially investment environment and foreign direct investment, “FDI”, which represents a considerable challenge for governments and policymakers in these countries. This study investigates the main variables and policies that affect FDI inflows and evaluates the effectiveness of these policies on attracting FDI inflows in five North African countries, namely Algeria, Egypt, Libya, Morocco, and Tunisia. To achieve that aim, a panel data of North Africa countries is used within the timeframe of 1996 to 2013, the study has adopted three types of FDI related variables that may affect host country attractiveness: economic variables, institutional variables, and political variables. Also, we have investigated the influence of two kinds of investment policies on FDI: domestic FDI policies, and international FDI policies. The results indicate that the trade liberalization policies and integration into global business have a positive and significant correlation with FDI inflows growth. Additionally, the study also found that increasing domestic investment in host countries attracts more FDI. and adopting more efficient investment policies (investment freedom policies) are statistically significant and have a positive impact on FDI inflows growth in the North Africa region.

Suggested Citation

  • Ahmed MUSABEH & Mehdi ZOUAOUI, 2020. "Policies and Variables affecting FDI: A Panel Data Analysis of North African Countries," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 7(1), pages 1-20, January.
    • Handle: RePEc:ist:iujepr:v:7:y:2020:i:1:p:1-20
    DOI: 10.26650/JEPR635016
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    More about this item

    Keywords

    Inward FDI; North Africa; investment policies; trade openness; panel data analysis;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F3 - International Economics - - International Finance

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