The Arab Spring and Its Implications for FDI Inflows to the MENA Region

Abstract

Abstract The Arab Spring (AS) marked an unprecedented event in the Middle East and North Africa (MENA) region, and it generated political and economic uncertainties and triggered violent conflicts and political rifts. This paper empirically examines the short-run and long-run effects of the AS on foreign direct investment (FDI) inflows to the MENA region and to individual MENA countries. The empirical analysis is implemented through the generalized method of moments (GMM) estimator for dynamic panel models, using different empirical specifications. The benchmark results show that the AS has led to important reductions in FDI inflows to the MENA region. A more detailed empirical analysis reveals significant variations in the AS effects on FDI inflows across MENA countries and it underscores distinct patterns over different time periods. These findings imply that governments in the MENA region are required to maintain political stability, and to adopt distinctive policies that lessen the adverse implications of the AS and that set favorable conditions for FDI inflows in the post-COVID-19 pandemic era.