Abstract
In this paper, we re-assess the nexus between various institutional indicators and foreign direct investment (FDI) flows in 16 Arab countries for the period (1985-2017) by employing the system Generalized Method of Moments. We contribute to existing literature in three ways: First, the impact of each institutional quality indicator on FDI flows is examined separately. Second, construct an institutional index in order to capture the overall impact of institutions on FDI. Finally, the paper also looks at the impact of the Arab Spring on FDI flows. Based on dynamic panel models, the empirical results show that some institutional indicators are more important than others in attracting more FDI in-flows. The results indicate that, the investment profile, law and order, and political institutions, lead to increased FDI flows. We also find a negative association between the Arab Spring unrest and FDI inflows.
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