Munich Personal RePEc Archive

Foreign Direct Investment and Economic Growth: Simultaneous Equation Model Case of Southern Mediterranean Countries (SMC)

aidi, mohamed (2019): Foreign Direct Investment and Economic Growth: Simultaneous Equation Model Case of Southern Mediterranean Countries (SMC).

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Abstract

In this work we study the effect of FDI on the economies of the South Mediterranean countries. Taking into account the positive effects and starting from the establishment of a simultaneous equation model applied to 8 countries, we tried to demonstrate the mechanisms through which FDI acts on economic growth. The estimation of our model shows that the level of human capital exports and to a lesser extent domestic investment, are the most prominent factors in creating positive effects. However, these results, while important, remain weakly motivating to generate positive growth or at least to reduce the negative effects of FDI.

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