Foreign Direct Investment-Economic Growth Nexus

Abstract

In this paper investigates the relationship between foreign direct investment and economic growth. On the one hand the effect of FDI on the economies of the MENA region, and, on the other hand, the impact of the economic growth of these countries on the attractiveness of FDI. Our objective, in this study, is to investigate the interrelationships between economic growth and FDI by using panel data models with simultaneous equations by Generalized Method of Moments (GMM) for the period 1998-2011. Our results show that there is bidirectional causality between economic growth and FDI. This implies that economic growth and FDI attractiveness are complementary. These empirical perspectives are particularly attractive to politicians because they help them build sound economic policies to sustain economic development and improve their level of attractiveness. This study aims to contribute to the exiting literature by determining the relationship between FDI and growth by three aspects: Firstly, few scientific papers treat this relationship only in the theoretical framework. Secondly, few scientific papers treat this relationship in the MENA region. Finally, previous studies had found that the nexus FDI-growth is mixed