Characteristics of foreign direct investment and economic growth for the MENA region

Abstract

Despite increases of foreign direct investment (FDI) inflows to various parts of the world, the MENA region has lagged the global economy with respect to FDI levels. The purpose of this non-experimental quantitative research was to examine the causal comparative relationship between FDI inflows and economic growth in the MENA region between 2005 and 2014. The study relied on archival data from the World Bank and focused on the short- and long-run relationship between FDI and GDP in the region, and tested hypotheses based on bivariate regression modelling. An existing short- and long-run causality link stemming from FDI to GDP based on an FDI-enthused growth testable hypothesis was found. A short-run causality link stemming from GDP to FDI based on a growth-compelled FDI testable hypothesis was also found. Study results suggest the need to increase FDI inflows to the MENA region so that short- and long-run economic growth are sustainable.