Foreign Direct Investment (FDI) and Governance: The Case of MENA

Ahmed Zidi; Tarek BEN Ali

Ahmed Zidi Department of economic sciences, computer and quantitative methods, Higher Institute of Business Administration, University of Gafsa, Tunisia. http://orcid.org/0000-0002-8039-1173
Tarek BEN Ali Higher Institute of Business Administration, University of Gafsa, Tunisia

Keywords: FDI, Governance, MENA Region, Panel Data.

Abstract

Is there a relationship between Foreign Direct Investment (FDI) and governance practiced in a given country? To answer this question we used the econometrics of panel data for the MENA region (11 countries) during the period 1996-2014. The results of the econometric estimation show seven variables that are statistically significant, namely the Gross Domestic Product (economic risk variable), the current account balance as% of GDP (economic risk variable), the domestic investment rate (economic risk variable), external debt (financial risk variable), the debt service as percentage of exports (financial risk variable), the functioning of the state (variable governance) and corruption (governance variable). While different parts of the world are competing to further attract FDI, countries in the MENA region need to conduct adequate policies oriented towards improving the business climate and good governance to benefit from these funding streams deemed less expensive.

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