Abstract
This paper is concerned with identifying and analysing the impact of selected macroeconomic variables on foreign direct investment (FDI) in Lebanon. Toward this purpose, the analysis will be based on secondary data collected for the period standing between 1990 and 2018 to implement the Vector Auto Regression (VAR) and Error correction model (ECM) techniques. The results reveal that Gross Domestic Product (GDP), deposit interest rate and debt are correlated with FDI. While trade was found statistically an insignificant variable for FDI inflow. The findings of the study recommend that establishing and maintaining economic stability and growth will spurs foreign investments in Lebanon.
Highlights
Globalization had faced and still facing a huge expansion worldwide
Foreign direct investment is defined as an investment made by an entity in one country into the interest of another entity located in another country such as business mergers and acquisitions (Atal et al, 2016)
The results revealed that the key determinants of Foreign Direct Investment (FDI) in the countries under study were size of the host economy, government size, natural resources and institutional variables
Summary
Globalization had faced and still facing a huge expansion worldwide. Emerging economies in the search of growth and macroeconomic stability are taking part of this globalization and more precisely in the economic field in the form of Foreign Direct Investment (FDI) (Siddiqui & Aumeboonsuke, 2014). The Middle East and North Africa (MENA) region includes countries with heterogeneous economic structures. These countries are known for their share of common characteristics that may discourage investors from taking a step toward FDI. Some of these features include political and macroeconomic instability that led to investment risk from the investor’s perspective, slow tempo of privatisation, the weak economic base due to high dependency on oil and gas, and underdeveloped financial and capital markets (Shirazi et al, 2008; Atal et al, 2016; Caccia et al, 2018). The result was noted in the increased volume of FDI inflows to MENA countries during the last 10 years
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