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The role of economic development in attracting foreign direct investment (FDI): Empirical evidence from the Moroccan case

Author

Listed:
  • Hajar Rachdi

    (Université Mohammed V de Rabat)

  • El Batoule Baryala

    (Université Mohammed V de Rabat)

Abstract

Foreign Direct Investment (FDI) flows in Morocco have been subject to fluctuations, influenced by the country's economic and political conditions. These fluctuations have had varying impacts on different sectors of the economy. Moroccan policies and incentives have aimed to create favorable conditions to attract multinational corporations and stimulate sectoral growth, leading to an increasing number of companies establishing themselves in Morocco. The study's central question is the role of local economic development in attracting FDI. Rather than focusing on the best relocation strategies for companies, the study aims to identify factors that make countries, particularly Morocco, attractive to foreign investment. To address this question, the study will employ an econometric approach, specifically multiple linear regression, to analyze the impact of various economic variables on inward FDI flows in Morocco. The analysis will be based on Moroccan data spanning from 1990 to 2022. The results indicate that while investment levels have a positive but statistically insignificant effect on foreign investment, economic growth, particularly its lagged effect, is an important factor in short-term foreign investment flows. Conversely, the openness index has a negative but insignificant relationship with FDI. These results highlight the central role of sustained economic growth in attracting Foreign Direct Investment and suggest that Moroccan policymakers should prioritize growth-oriented strategies to enhance the country's investment attractiveness and improve the long-term effectiveness of FDI. Keywords: Foreign Direct Investment, Local Economic Development, Auto Regressive Distributed Lag.

Suggested Citation

  • Hajar Rachdi & El Batoule Baryala, 2025. "The role of economic development in attracting foreign direct investment (FDI): Empirical evidence from the Moroccan case," Post-Print hal-05090962, HAL.
    • Handle: RePEc:hal:journl:hal-05090962
    DOI: 10.5281/zenodo.15547109
    Note: View the original document on HAL open archive server: https://hal.science/hal-05090962v1
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    References listed on IDEAS

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    1. Yerkezhan Akhmetzaki & Bulat Mukhamediyev, 2017. "Fdi Determinants In The Eurasian Economic Union Countries And Eurasian Economic Integration Effect On Fdi Inflows," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 959-970.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    4. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
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