Abstract
Purpose: This paper aim to investigate the impact of Foreign Direct Investment (FDI) on the economic growth of Mauritania for the period 1976 to 1995 quarterly data. It evaluated the Gross Domestic Product (GDP) performance and the trends of FDI and Gross Fix Capital Formation (GFCF) in Mauritania. Methodology/sample: to demonstrate the relationship between Mauritanian Gross Domestic Product (GDP) and Foreign Direct Investment (FDI) and Gross Fix Capital Formation (GFCF) Multiple-Regression-Model has been applied along side with various econometrics techniques such as Unit-Root Test, Granger-Causality Test and Ordinary Least Square (OLS). GDP in this model is used as dependent variable whereas FDI and GFCF are measured as independent variables. Findings: According to the results, Unit Root Test indicated that all the variables included in the model were not stationary at level except FDI, whereas GDP and GFCF are stationary at first difference. The model is overall significant with the positive and significant relationship of GDP, FDI and GFCF (divya). Result also indicate a good fit for the model with R2=85%. The Granger Causality Test revealed that there was no causality between the variables since all p-value obtained are more than 5%. Practical implications: Based on the empirical result of this paper, policy recommendation proposed that for Mauritania to generate more foreign direct investment, hard work should be made at solving problems of government involvement in business; relative closed economy; corruption; weak public institutions; and poor external image, and political instability.
Highlights
Foreign Direct Investment (FDI) is seemed to have a positive influence on the economic growth of the developing countries through direct and indirect ways
This paper aims to discover the impact of foreign direct investment (FDI) on Mauritania economic growth (GDP) for the period 1976 to 1995 quarterly data and to observe the relationship between (GDP) and Gross Fixed Capital Formation (GFCF)
The main objective of this study is to investigate the impact of Foreign Direct Investment (FDI) on the economic growth of Mauritania for the period 1976 to 1995
Summary
Foreign Direct Investment (FDI) is seemed to have a positive influence on the economic growth of the developing countries through direct and indirect ways. Foreign direct investment incentives may be in shape of low corporate and income tax rates, tax holidays, other types of tax concessions, preferential tariffs, special economic zones, investment financial subsidies, soft loan or loan guarantees, free land or land subsidies, relocation and expatriation subsidies, job training and employment subsidies, infrastructure subsidies, research and development support and derogation from regulations, usually for very large projects [1] This important incentives offered by developing countries have been taken by foreign firms to fulfil their objective by increasing profits through numbers of advantage such as control over local market, low cost of labour. According to a number of studies such as [4] foreign direct investment can serve as a means of transfer of technology and knowledge [4]
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