Market Size And Foreign Direct Investment In Selected African Economies

Abstract

This study investigates the relationship between market size and foreign direct investment (FDI) in some African countries from 2005 to 2020 using a panel data of 4 countries (Egypt, Tunisia, Morocco, Algeria). Following the application of the fixed effect and random effect models, the Hausman test was used to choose which model to adopt. According to the findings, there is a substantial and positive relationship between market size and FDI inflow in countries under study. Generally, the results of statistical testing show that the fixed effects model is the best model, and that the estimates of the suggested model parameters do not contradict economic theory assumptions. It was discovered that 65.8% of the changes that occur in FDI inflows in the countries under study are due to market size.