ECONOMIC STABILITY AND FOREIGN DIRECT INVESTMENT: AN EMPIRICAL STUDY OF THE MIDDLE EAST AND NORTH AFRICA (MENA) COUNTRIES

Abstract

The aim of this study is to analyze and test the relationship between economic stability and foreign direct investment flows in 15 countries of the Middle East and North Africa (MENA) countries over the years (1980-2018). Since the most important economic stability indicator is economic growth and inflation, the paper studied the impact of economic stability on the foreign direct investment flows in long and short run in the sense that if there is a positive impact or a negative of economic growth and the inflation rate on foreign direct investment in these countries. The results indicate that there is no relationship in the long run. However, in the short run, the VAR results show that inflation rate has a marginally negative impact on foreign direct investment, as its predictive power greater than the rate of economic growth. The economic growth index does not have an impact on foreign direct investment.