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Foreign Direct Investment, Macroeconomic Instability And Economic Growth in MENA Countries

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Author Info
Mustapha Sadni Jallab () (United Nations Economic Commission for Africa and African Trade Policy Center)
Monnet Benoît Patrick Gbakou (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)
René Sandretto () (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

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Abstract

This paper aims at analyzing the possible influence of foreign direct investment (FDI) on economic growth in the particular case of Middle East and North African countries (MENA). During the last years, the relation between FDI and growth in LDCs has been discussed extensively in the economic literature. However, the view that FDI stimulates economic growth does not receive an unanimous support. In order to access empirically this relation in MENA countries, we use a dynamic panel procedure with observations per country over the period 1970-2005. To improve efficiency, we use the standard “difference” and “system” GMM and 2SLS estimators. Our findings show that there is no independent impact of FDI on economic growth. The growth-effect of FDI does not also depend on degree of openness to trade and income per capita. But, the positive impact of FDI on economic growth depends on macroeconomic stability: there is a threshold effect of annual percentage change of consumer prices.

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0817.

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Length: 23 pages
Date of creation: 2008
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Handle: RePEc:gat:wpaper:0817

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Related research
Keywords: Foreign Direct Investment; Macroeconomic stability; Economic Growth; Middle East and North Africa; Two-stage Least Squares; Generalized Moments Methods;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
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
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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