The Impact of Foreign Direct Investment on Economic Growth in the MENA Region

Abstract

Economic growth is one of the basic objectives of countries' economic programs, which is influenced by various factors such as the amount of capital available. Attracting capital and foreign direct investment is an important way to accelerate the economy towards development and job creation, which can be considered an engine of economic growth and development. Considering the special importance of foreign direct investment (FDI) in economic growth, this article examines the impact of FDI on economic growth. For this purpose, the data of some countries in the Middle East and North Africa (Egypt, Saudi Arabia, Morocco, Jordan, Tunisia, Iran, Turkey, and Yemen) were selected for the period from 1980 to 2020. A second-generation panel cointegration method was used to achieve the study's objective. According to the results, the impact of FDI on economic growth in Egypt, Saudi Arabia, Morocco, Tunisia, Turkey, and Yemen during the study period is positive and statistically significant. In Jordan and Iran, FDI was found to have no impact on economic growth. Moreover, the impact of capital stock and labor on the economic growth of member countries is positive and significant, except in Tunisia, Egypt, Jordan, and Yemen.

Keywords

• Panel Data
• Panel Cointegration
• Economic Growth
• Foreign Direct Investment

MENA Bölgesinde Doğrudan Yabancı Yatırımın Ekonomik Büyüme Üzerindeki Etkisi

Abstract

Ekonomik büyüme, mevcut sermaye miktarı gibi çeşitli faktörlerden etkilenen ülkelerin ekonomik programlarının temel hedeflerinden biridir. Sermayeyi ve doğrudan yabancı yatırımı çekmek, ekonomiyi kalkınmaya ve istihdam yaratmaya doğru hızlandırmanın önemli bir yoludur. Bu, aynı zamanda ekonomik büyüme ve kalkınmanın motoru olarak da düşünülebilir. Doğrudan Yabancı Yatırımın (DYY) ekonomik büyüme üzerindeki özel önemi göz önüne alındığında, bu makale doğrudan yabancı yatırımın ekonomik büyüme üzerindeki etkisini incelemektedir. Bu amaçla 1980-2020 dönemi için Ortadoğu ve Kuzey Afrika bölgesindeki bazı ülkeler (Mısır, Suudi Arabistan, Fas, Ürdün, Tunus, İran, Türkiye ve Yemen) seçilmiştir. Araştırmanın amacına ulaşmak için panel eşbütünleşme yönteminin ikinci nesil metodolojisi kullanılmıştır. Elde edilen bulgulara göre, inceleme döneminde Mısır, Suudi Arabistan, Fas, Tunus, Türkiye ve Yemen'de doğrudan yabancı yatırımların ekonomik büyüme üzerindeki etkileri pozitif ve istatistiksel olarak anlamlıdır. Ürdün ve İran'da ise doğrudan yabancı yatırımların ekonomik büyüme üzerinde herhangi bir etkisinin olmadığı tespit edilmiştir. Ayrıca, sermaye stoku ve işgücü Tunus, Mısır, Ürdün ve Yemen dışında üye ülkelerin ekonomik büyümelerini pozitif ve anlamlı olarak etkilemektedir.

Keywords

• Panel Veri
• Panel Eşbütünleşme
• Ekonomik Büyüme
• Doğrudan Yabancı Yatırım

References

1. Aitken, B. J. and Harrison, A. (1999). Do Domestic Firms Benefit From Direct Foreign Investment? Evidence From Venezuela. American Economic Review, 89(3), 605-618.
2. Alfaro, L., Kalemli-Ozcan, S. and Volosovych, V. (2008). Why Doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation. Review of Economics and Statistics, 90(2), 347–368.
3. Acet, H., Ashurov, E. H., and Khatır, A. (2020). The Relationship between Foreign Direct Investments and Economic Growth: The Case of Central Asian Countries. The Journal of Selcuk University Social Sciences Institute, 43, 391-402.
4. Beugelsdijk, S., Smeets, R. and Zwinkels, R. (2008). The Impact of Horizontal and Vertical FDI on Host's Country Economic Growth. International Business Review, 17(4), 452–472.
5. Blomstrom, M., Lipsey, R. and Zejan, M. (1994). What Explains Developing Country Growth?. NBER Working Paper, 4132, 1-31.
6. Borensztein, E, J. G. and Lee, J.W. (1998). How Does Foreign Direct Investment Affect Economic Growth?. Journal of International Economics, 45(1), 115-135.
7. Carkovic, M. and Levine, R. (2002). Does Foreign Direct Investment Accelerate Economic Growth?. Working Paper, 1-23.
8. Chudik, A. and Pesaran, M. H. (2015). Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Data Models with Weakly Exogenous Regressors. Journal of Econometrics, 188(2), 393-420.

9. De Mello, L.R. (1997). Foreign Direct Investment in Developing Countries and Growth: A Selective Survey. Journal of Development Studies, 34(1), 1-34.
10. De Mello, L.R. (1999). Foreign Direct Investment-Led Growth: Evidence From Time Series and Panel Data. Oxford Economic Papers, 51(1), 133-151.
11. Ebghaei, F. (2016). Effect of Firm’s Export-Orientation on Backward Spillovers of Foreign Direct Investment in Turkish Manufacturing Industry. Journal of Business Economics and Finance, 5 (4), 351-359.
12. Ebghaei, F. and Akkoyunlu Wigley, A. (2018). The Role of Exports in the Transmission of Horizontal and Vertical Spillovers of Foreign Direct Investment: The Case of Turkish Manufacturing Industry. The Developing Economies, 56 (1), 35-50.
13. Girma, S. (2005). Apsorptive Capasity and Productivity Spillovers for FDI: A Threshold Regression Analysis. Oxford Bullettin of Economics and Statistics, 67(3), 281-306.
14. Grahovac, D., Softić, S. (2017). Impact of The FDI on Unemployment Rate in Countries of West Balkan. Review of Innovation and Competitiveness: A Journal of Economic and Social Research, 3(2), 65-82.
15. Hsiao, C. (2003). Analysis of Panel Data (Second Edition). New York: Cambridge University Press.
16. Khatabi, S., Komeyjani, A., Mohammadi, T., and Memarnejad, A. (2017). Factors Affecting the Attraction of Foreign Direct Investment in Mena Region. Economic modeling, 1(37), 63-75.
17. Miankhel, A. K., Thangavelu, S. M., and Kalirajan, K. (2009). Foreign Direct Investment, Exports, and Economic Growth in South Asia and Selected Emerging Countries: A Multivariate VAR Analysis. Working paper, 23, 1-22.
18. Musa Ahmed, E. (2012). Are the FDI Inflow Spillover Effects on Malaysia's Economic Growth Input Driven?. Economic Modelling, 29(4), 1498-1504.
19. Paap, R., Wang, W. and Zhang, X. (2015). To Pool or not to Pool: What is a Good Strategy?. Journal of Applied Econometrics, 34(5), 724-745.
20. Pesaran, H., M., Ullah, A. and Yamagata, T. (2008). A Bias-Adjusted Lm Test of Error Crosssection Independence. The Econometrics Journal, 11(1), 105-127.
21. Roy, A.G. and Von den Berg, H.F. (2006). Foreign Direct Investment and Economic Growth: A Time-Series Approach. Global Economy Journal, 6(1), 1-19.
22. The World Bank Organization (2022). https://data.worldbank.org/.
23. Velnampy, T., Sivapalan, A. and Rajendran, K. (2013). Foreign Direct Investments, Economic Growth and Unemployment: Evidence from Sri Lanka. International Journal of Business and Management, 9(1), 140-148.
24. Zhang, K. H. (2001). Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia and Latin America. Contemporary Economic Policy, 10(2), 175-185.
25. Zhang, K. H. (2006). Foreign Direct Investment and Economic Growth in China: A Panel Data Study for 1992-2004. Paper presented at WTO, China and Asian Economies, Beijing, China, 24-25 June.