Factors Associated with FDI Inflows to MENA Region: An Empirical Examination

Authors

1 Department of Economics, Research and Science Branch, Islamic Azad University, Tehran, Iran

2 Faculty of Economics, University of Tehran, Tehran, Iran.

3 Faculty of Economics, University of Allameh Tabatabae'i, Tehran, Iran.

4 Faculty of Economics, Research and Science Branch, Islamic Azad University, Tehran, Iran.

Abstract

The purpose of the current research was to empirically examine the relationship between six independent variables and foreign direct investment (FDI) inflows (dependent variable) to countries in the Middle East and North Africa (MENA) region for the period of 2002-2016. The independent variables studied in this research were foreign exchange systems, good governance, inflation, gross domestic product, market openness, and doing business. To test the research hypotheses, a two-stage least squares (2SLS) regression was used to analyze the imbalanced pooled data for the years 2002-2016. The hypotheses were tested at a 95% confidence level, and Eviews produced two-tailed probability T statistics.  Based on the analysis results, none of the six hypotheses could be rejected. This result shows that good governance, gross domestic product, openness, and doing business had a positive relationship despite inflation and the negative effect on FDI inflows.  As for the foreign exchange region, the result showed that countries with fixed exchange rate systems attracted more FDI inflows than countries with the two-tiered system.

Keywords

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Iranian Economic Review
Volume 24, Issue 2
May 2020
Pages 313-331

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