Foreign Direct Investment as a Key Factor for the Economic Development of Emerging Countries: Evidence from Saudi Arabia.

Author(s)

Abdulaziz Adel Aldaarmi ,

Download Full PDF Pages: 01-09 | Views: 616 | Downloads: 205 | DOI: 10.5281/zenodo.5065974

Volume 10 - April 2021 (04)

Abstract

The objective of this paper is to present a study aimed at assessing the relationship between FDI and economic growth in Saudi Arabia. While doing so, the study also looked at the effect that trade openness, real exchange rates, and oil prices have on FDI. We used an Auto-regressive Distributed Lag (ARDL) model, which looked at both the short- and long-term effects, in addition to an Error Correlation Model to discern the causal relationship between the two. The results of the Long-term ARDL model indicate that oil prices and the real effective exchange rates do have positive long-term effects on FDI in Saudi Arabia. Additionally, the study found that there was no statistically significant long-term relationship between economic growth and FDI and also between trade openness and FDI. Our study recommends that other factors—such as research and development, corruption, political stability and taxes—be included in future research in this area 

Keywords

Foreign Direct Investment, Economic Growth, Oil price, Auto-regressive Distributed Lag (ARDL) model 
JEL Classifications: F21, F41, O16

References

                     i            Abdulrahim, J. (2015). The impact of foreign direct investment on Saudi Arabia. Pronco Scholar. http://hdl.handle.net/10211.3/145889

        ii            Ahmed, M. (2017). Foreign Direct Investment (FDI) in Oil-Exporting Countries: Long-run Determinants and Causal Relationship with Economic Growth (Doctoral dissertation, University of Leicester).

      iii            Alshehry, A. S. (2015). Foreign direct investments and economic growth in Saudi Arabia: a cointegration analysis. Developing Country Studies, 5(6), 69-76.

       iv            Amin, S., & Pearce, B. (1974). Accumulation on a world scale: A critique of the theory of underdevelopment (Vol. 2, p. 360). New York: Monthly Review Press.

         v            Akinlo, A. E. (2004). Foreign direct investment and growth in Nigeria: An empirical investigation. Journal of Policy modeling, 26(5), 627-639.

       vi            Anwar, S., & Cooray, A. (2015). Financial flows and per capita income in developing countries. International Review of Economics & Finance, 35, 304-314.

     vii            Badr, O. M., & Ayed, T. L. (2015). The mediator role of FDI in North Africa: Case of Egypt. Journal of Advanced Management Science, 3(1).

   viii            Bayar, Y. (2014). Effects of foreign direct investment inflows and domestic investment on economic growth: Evidence from Turkey. International Journal of Economics and Finance, 6(4), 69-78.

       ix            Bekhet, H. A., & Al-Smadi, R. W. (2015). Determinants of Jordanian foreign direct investment inflows: Bounds testing approach. Economic Modelling, 46, 27-35.

         x            Belloumi, M. (2014). The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model. Economic systems, 38(2), 269-287.

       xi            Bornschier, V. (1980). Multinational corporations and economic growth: A cross-national test of the decapitalization thesis. Journal of Development Economics, 7(2), 191-210.

     xii            Choi, Y. J., & Baek, J. (2017). Does FDI really matter to economic growth in India?. Economies, 5(2), 20.

   xiii            Dal Bianco, S., & Nguyen, L. C. T. (2017). FDI inflows, price and exchange rate volatility: New empirical evidence from Latin America. International Journal of Financial Studies, 5(1), 6.

   xiv            Elimam, H. (2017). Determinants of foreign direct investment in Saudi Arabia: A review. International Journal of Economics and Finance, 9(7), 222-227.

     xv            Gui-Diby, S. L., & Renard, M. F. (2015). Foreign direct investment inflows and the industrialization of African countries. World Development, 74, 43-57.

   xvi            Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International Review of Economics & Finance, 42, 116-133.

 xvii            Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42.

xviii            Omri, A. (2014). The nexus among foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region. Research in Economics, 68(3), 257-263.

   xix            Rebelo, S. (1991). Long-run policy analysis and long-run growth. Journal of Political Economy, 99(3), 500-521.

     xx            Ridzuan, A. R., Ismail, N. A., & Che Hamat, A. F. (2017). Does foreign direct investment successfully lead to sustainable development in Singapore?. Economies, 5(3), 29.

   xxi            Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.

 xxii            Tahir, M., Khan, I., & Shah, A. M. (2015). Foreign remittances, foreign direct investment, foreign imports and economic growth in Pakistan: A time series analysis. Arab Economic and Business Journal, 10(2), 82-89.

xxiii            Temiz, D., & Gökmen, A. (2014). FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey. International Business Review, 23(1), 145-154.

xxiv            Wright Jr, J. W. (Ed.). (2016). Business and economic development in Saudi Arabia. Springer.

  xxv            World Bank, (2021). Retrieved from: https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=SA

Cite this Article: