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Capital Account Openness, Political Institutions And Fdi In Mena Region: An Empirical Investigation

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  • MOUNA GAMMOUDI

    (Universite de Reims Champange Ardenne, France)

  • MONDHER CHERIF

    (Universite de Reims Champange Ardenne, France)

Abstract

This paper examines how capital account liberalization (CAL) affects Foreign Direct Investment (FDI) inflows. We use the System Generalized-Method-of-Moments (GMM) estimator developed for the dynamic panel model for a sample of 17 Middle East North and Africa (MENA) countries from 1985 to 2009. Our findings reveal that the positive impact of CAL on FDI depends on the political stability in a host country. Furthermore, results show that enhancing democratic institutions, enforcing property rights, reducing the risk of expropriation and the religious tension seem to be some of the most promising policies in terms of attracting FDI in the region. Also, we find that foreign investors value the quality of institutions more than the level of corruption or bureaucracy quality in the location choice. Our results are robust by using a different database of institutional qualities. Research findings are relevant for MENA countries given that many of them have engaged in a process of liberalization and have weak institutions.

Suggested Citation

  • Mouna Gammoudi & Mondher Cherif, 2016. "Capital Account Openness, Political Institutions And Fdi In Mena Region: An Empirical Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(2), pages 53-76, June.
    • Handle: RePEc:jed:journl:v:41:y:2016:i:2:p:53-76
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    Cited by:

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    2. Kechagia, Polyxeni & Metaxas, Theodore, 2020. "Institutional quality and FDI inflows: an empirical investigation for Turkey," MPRA Paper 104309, University Library of Munich, Germany.
    3. Rachdi, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2018. "Liberalization, crisis and growth in MENA region: Do institutions matter?," Journal of Policy Modeling, Elsevier, vol. 40(4), pages 810-826.
    4. Mouna Gammoudi & Mondher Cherif & Simplice Asongu, 2016. "FDI and Growth in the MENA countries: Are the GCC countries Different?," Working Papers of the African Governance and Development Institute. 16/015, African Governance and Development Institute..
    5. Metaxas, Theodore & Kechagia, Polyxeni, 2017. "FDI and Terrorism in developing Asia: Approaches and Discussion," MPRA Paper 78165, University Library of Munich, Germany.
    6. Melike E Bildirici, 2021. "Terrorism, environmental pollution, foreign direct investment (FDI), energy consumption, and economic growth: Evidences from China, India, Israel, and Turkey," Energy & Environment, , vol. 32(1), pages 75-95, February.
    7. Gibogwe, Vincent & Nigo, Ayine R.S. & Kufuor, Karen, 2022. "Foreign direct investment and economic growth in Tanzania," MPRA Paper 115028, University Library of Munich, Germany, revised 20 Oct 2022.
    8. RACHDI, Houssem & Hakimi, Abdelaziz & Hamdi, Helmi, 2015. "Financial Liberalization, Banking Crisis and Economic Growth in MENA Region: Do Institutions Matter?," MPRA Paper 64562, University Library of Munich, Germany.
    9. Arezki,Rabah & Belmejdoub,Oussama & Diab,Bilal & Kalla,Samira & Ha Nguyen & Saif,Abdulla Fahed Abdulla Ali & Yotzov,Ivan Victorov, 2022. "From #Hashtags to Legislation : Engagement and Support for Economic Reforms in the GulfCooperation Council Countries," Policy Research Working Paper Series 10090, The World Bank.

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    More about this item

    Keywords

    Capital; Account Liberalization; Foreign Direct Investment; Institutional Quality; GMM-System;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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