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Output volatility and FDI to Middle-East and North-African countries: A close-up on the source countries

Author

Listed:
  • D. Nicet-Chenaf
  • Eric Rougier

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

Abstract

Macroeconomic determinants of FDI are seldom analysed from the perspective of source countries, priority generally being given to host country characteristics. Using a gravity model, we analyse FDI flows from a sample of European and non-European countries to MENA economies. We find that European investment to our chosen MENA host countries is higher the higher the source country output volatility, thus lending support to the existence of a substitution effect for European transnational corporations. We also find that the 1995 Barcelona agreement has reinforced MENA countries’ vulnerability to European short- and medium-term macroeconomic cycles. Regional integration of MENA economies and the emergence of new sources of FDI for MENA economies is not necessarily a positive development since investment to MENA countries coming from the Mediterranean periphery of Europe is affected by a revenue effect, with FDI flows being reduced when macroeconomic volatility increases in the zone. Our results are robust with respect to various changes in estimator, sample composition and measurement of instability.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • D. Nicet-Chenaf & Eric Rougier, 2014. "Output volatility and FDI to Middle-East and North-African countries: A close-up on the source countries," Post-Print hal-02273243, HAL.
    • Handle: RePEc:hal:journl:hal-02273243
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    Cited by:

    1. Aisha Tauqir & Muhammad Tariq Majeed & Sadaf Kashif, 2022. "Foreign Direct Investment and Output Volatility Nexus: A Global Analysis," Foreign Trade Review, , vol. 57(3), pages 283-309, August.
    2. Éric Rougier & Nicolas Yol, 2019. "The volatility effect of diaspora's location," The World Economy, Wiley Blackwell, vol. 42(6), pages 1796-1827, June.
    3. Chenaf-Nicet, Dalila & Rougier, Eric, 2016. "The effect of macroeconomic instability on FDI flows: A gravity estimation of the impact of regional integration in the case of Euro-Mediterranean agreements," International Economics, Elsevier, vol. 145(C), pages 66-91.
    4. Eric Rougier & Nicolas Yol, 2018. "The volatility effect of diaspora’s location: A migration portfolio approach," Cahiers du GREThA (2007-2019) 2018-09, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    5. Chien-Chiang Lee & Godwin O Olasehinde-Williams & Ifedolapo Olabisi Olanipekun, 2022. "GDP volatility implication of tourism volatility in South Africa: A time-varying approach," Tourism Economics, , vol. 28(2), pages 435-450, March.
    6. Kazeem Bello Ajide & Oluwanbepelumi Esther Osode, 2017. "Does FDI Dampen or Magnify Output Growth Volatility in the ECOWAS Region?," African Development Review, African Development Bank, vol. 29(2), pages 211-222, June.

    More about this item

    JEL classification:

    • 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
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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