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Foreign Direct Investment and Macroeconomic Stability in Resource-Dependent Emerging Economies

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  • Alotaibi, Abdullah

    (Senior Graduate Assistant, Department of Accounting and Finance, KFUPM, Dhahran, Saudi Arabia.)

Abstract

This paper examines the impact of foreign direct investment (FDI) on long-term growth and macroeconomic stability in 24 resource-dependent emerging economies - current and former members of OPEC+ - over the period 1996-2023. Using fixed-effects and dynamic difference GMM estimators, alongside Dumitrescu-Hurlin panel Granger causality tests, the analysis documents three main findings. First, the growth effects of FDI materialize with a one-year lag rather than contemporaneously, reflecting the time required for capital absorption and technology diffusion. Second, the interaction between FDI and natural resource rents is positive and strengthens with the degree of resource dependence, indicating that resource abundance amplifies rather than constrains the productivity of foreign capital. Third, government effectiveness conditions both the growth and stability effects of FDI, while macroeconomic stability indicators (inflation, unemployment, current account balance) appear to attract FDI rather than be improved by it. The findings contribute to the conditional FDI-growth literature and offer policy-relevant insights for resource-rich emerging economies seeking to leverage foreign capital for sustainable diversification.

Suggested Citation

  • Alotaibi, Abdullah, 2026. "Foreign Direct Investment and Macroeconomic Stability in Resource-Dependent Emerging Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 16(4), pages 153-166, July.
    • Handle: RePEc:eco:journ2:v:16:y:2026:i:4:id:24021
    DOI: 10.32479/ijeep.24021
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