Abstract
Abstract The main aim of this paper is to investigate the effect of the informal economy (IE) on foreign direct investment (FDI) in a sample of petroleum producing countries (Algeria, Norway, the Russian Federation, Saudi Arabia and United States) based on data covering the period of 1991–2018 and using the Non-linear Autoregressive Distribution Lag (NARDL) model. The NARDL model was built separately for each country in the study sample. The main finding of this study is the impact of IE size on FDI inflows in all of the countries in the study sample, even if they are all producing and exporting countries. The empirical results lead to distinguish between two sub-groups. The first sub-group consists of countries whose FDI inflows have been positively affected by positive and negative shocks in the IE. These countries are characterised by a high share of natural resources in their GDP. The second sub-group consists of countries whose inward FDI has been positively affected by negative shocks in the IE and negatively affected by the positive ones. The most common feature of this subgroup is the relative independence of economics from natural resources.
Highlights
International capital movements began to rise significantly since the early 1980s, with the abandonment of the communist system by some communist countries, and the beginning of their entry into the market economy
The main aim of this paper is to investigate the effect of the informal economy (IE) on foreign direct investment (FDI) in a sample of petroleum producing countries (Algeria, Norway, the Russian Federation, Saudi Arabia and United States) based on data covering the period of 1991–2018 and using the Non-linear Autoregressive Distribution Lag (NARDL) model
This paper aims at exploring the impact of IE on FDI inflows in a sample of petroleum producing countries, using data taken from three sources: FDI as a percentage of official GDP and growth rate were extracted from the World Bank web site (2021); the size of IE as percentage of official GDP was gathered from the studies (Medina & Schneider, 2018; Kahina & Saïd, 2020)
Summary
International capital movements began to rise significantly since the early 1980s, with the abandonment of the communist system by some communist countries, and the beginning of their entry into the market economy. The international institutions had accompanied these countries in their economic transition by providing the necessary mechanisms to achieve the capital. Financial, and social issues, governments seek to attract international capital. International capital can provide jobs and income opportunities to people, increasing household consumption and the general demand. The FDI is the most important aspect of capital movement; and it can be in two ways: inflow FDI and outflow FDI. The following definition has been provided by OECD (2019): “Foreign direct investment is a category of investment that reflects the Economics and Business
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