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Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations

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  • Shah, Mumtaz Hussain

Abstract

This research paper studies the likely effect of financial development on inward Foreign Direct Investment (FDI) in Middle East and North African (MENA) nations. Making use of yearly data for ten MENA developing countries from 1988 to 2015, the study finds significant positive influence of financial development on overseas investors’ investment decision. The empirically established FDI determining factors such as market size, development level, trade liberalisation, macroeconomic stability, trade agreements, bilateral investment treaties and infrastructure & skilled labour availability, were also taken into consideration. Moreover, to sift purely the effect of financial development devoid of any time variant phenomenon equally affecting all the MENA nations I have also controlled for a time trend. Hence, it is expected that the results of the research shall be free of any omitted variable bias. Using various proxies for financial development through random effects panel estimation method the findings of the study suggests that financial development is a robust predictor of FDI inflows in the MENA region.

Suggested Citation

  • Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82013
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    Cited by:

    1. Shah, Mumtaz Hussain, 2018. "Corruption & Foreign Direct Investment: The Case of South Asia," MPRA Paper 107253, University Library of Munich, Germany.
    2. Shah, Mumtaz Hussain & Jamil, Iqra, 2016. "Trade Agreements and Transnational Corporations Presence in the Developing Asia," MPRA Paper 107250, University Library of Munich, Germany.
    3. Huy Tiet Pham & Christopher Gan & Baiding Hu, 2022. "Causality between Financial Development and Foreign Direct Investment in Asian Developing Countries," JRFM, MDPI, vol. 15(5), pages 1-26, April.
    4. Shah, Mumtaz Hussain & Azam, Ayesha, 2018. "Financial Development and Investors Location Choice in The Arab World," MPRA Paper 107245, University Library of Munich, Germany.
    5. Shah, Mumtaz Hussain & Khan, Faisal, 2019. "Telecommunication Infrastructure Development and FDI into Asian Developing Nations," MPRA Paper 107255, University Library of Munich, Germany.
    6. Shah, Mumtaz Hussain & Lala, Gule, 2017. "Autocracy, Democracy and FDI inflows in Asian Developing Countries," MPRA Paper 107248, University Library of Munich, Germany.
    7. 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.
    8. Shah, Mumtaz Hussain & Khan, Fiaz, 2018. "Profitability and Working Capital Management Nexus: Evidence from Food & Personal Care Products Sector Firms Listed on Pakistan Stock Exchange," MPRA Paper 107254, University Library of Munich, Germany.
    9. Shah, Mumtaz Hussain & Zeb, Aisha, 2017. "Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States," MPRA Paper 107249, University Library of Munich, Germany.
    10. Salihu Shuaibu & Suleiman A. Badayi & Balarabe A. Musa, 2022. "Analysis of financial development and foreign direct investment inflows nexus in ECOWAS countries: Least squares dummy variable approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4599-4606, October.
    11. Shah, Mumtaz Hussain & Khan, Atta Ullah, 2017. "Factors determining capital structure of Pakistani non-financial firms," MPRA Paper 82015, University Library of Munich, Germany.
    12. Luma Al-Qudah & Barbara Piontek & Judit Olah, 2021. "Economic Growth and Foreign Direct Investment in the Context of Financial Development: Evidence from Jordan," European Research Studies Journal, European Research Studies Journal, vol. 0(2B), pages 762-782.

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    More about this item

    Keywords

    Financial Development; FDI; MENA Countries and Panel Data.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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