Foreign Direct Investment, Macroeconomic Instability and Economic Growth in MENA Countries
United Nations - Economic Commission for Africa
University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)
Rene P. Sandretto
French National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE); University of Lyon 2
July, 23 2008
GATE Working Paper No. 08-17
This paper aims at analyzing the possible influence of foreign direct investment (FDI) on economic growth in the particular case of Middle East and North African countries (MENA). During the last years, the relation between FDI and growth in LDCs has been discussed extensively in the economic literature. However, the view that FDI stimulates economic growth does not receive an unanimous support. In order to access empirically this relation in MENA countries, we use a dynamic panel procedure with observations per country over the period 1970-2005. To improve efficiency, we use the standard "difference" and "system" GMM and 2SLS estimators. Our findings show that there is no independent impact of FDI on economic growth. The growth-effect of FDI does not also depend on degree of openness to trade and income per capita. But, the positive impact of FDI on economic growth depends on macroeconomic stability: there is a threshold effect of annual percentage change of consumer prices.
Number of Pages in PDF File: 23
Keywords: Foreign Direct Investment, Macroeconomic stability, Economic Growth, Middle East and North Africa, Two-stage Least Squares, Generalized Moments Methods
JEL Classification: C32, C33, F21, F23, F43working papers series
Date posted: July 23, 2008
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