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Impact of EU FDI on economic growth in Middle Eastern countries

Impact of EU FDI on economic growth in Middle Eastern countries This paper develops a simultaneous equations model to test the process of interaction between foreign direct investment (FDI), exports and economic growth in three Middle Eastern countries: Egypt, Jordan and Oman, and tests for any possible feedback effects. Most of the FDI in these countries flows from the European Union. The simultaneous equations model results suggest that higher rates of economic growth result in a greater inflow of foreign capital. The regression results also suggest that interest rate differentials exert a much stronger effect than economic growth on the attraction of foreign capital in the case of Egypt. However, this variable does not seem to play a significant role in the case of Oman. Moreover, the simultaneous equations model results suggest that there is a feedback effect in the relationship between economic growth and capital inflow in all sample countries. A greater inflow of foreign capital leads to growth in the exports of good and services. The expansion in exports leads to growth in gross national product that, in turn, encourages the attraction of more foreign capital. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Business Review Emerald Publishing

Impact of EU FDI on economic growth in Middle Eastern countries

M.M. Metwally
European Business Review , Volume 16 (4): 9 – Aug 1, 2004
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Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
0955-534X
DOI
10.1108/09555340410547035
Publisher site
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Abstract

This paper develops a simultaneous equations model to test the process of interaction between foreign direct investment (FDI), exports and economic growth in three Middle Eastern countries: Egypt, Jordan and Oman, and tests for any possible feedback effects. Most of the FDI in these countries flows from the European Union. The simultaneous equations model results suggest that higher rates of economic growth result in a greater inflow of foreign capital. The regression results also suggest that interest rate differentials exert a much stronger effect than economic growth on the attraction of foreign capital in the case of Egypt. However, this variable does not seem to play a significant role in the case of Oman. Moreover, the simultaneous equations model results suggest that there is a feedback effect in the relationship between economic growth and capital inflow in all sample countries. A greater inflow of foreign capital leads to growth in the exports of good and services. The expansion in exports leads to growth in gross national product that, in turn, encourages the attraction of more foreign capital.

Journal

European Business Review – Emerald Publishing

Published: Aug 1, 2004

Keywords: Middle East; European Union; International investments

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