Does Economic Freedom Enhance the Impact of Foreign Direct Investment on Economic Growth in North African Countries? A Panel Data Analysis

This article investigates the causal interactions between foreign direct investment (FDI), economic freedom and economic growth on a panel of four North African countries (Tunisia, Morocco, Algeria and Egypt), over a 5‐year period from 1980 to 2013. Using the System Generalized Method of Moments (GM...

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Bibliographic Details
Published in:African development review 2016-03, Vol.28 (1), p.64-74
Main Authors: Zghidi, Nahed, Mohamed Sghaier, Imen, Abida, Zouheir
Format: Article
Language:English
Subjects:
Data analysis
Development economics
Economic development
Economic growth
Foreign investment
Freedoms
Generalized method of moments
Investments
Multinational corporations
Panel data
Studies
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Summary:This article investigates the causal interactions between foreign direct investment (FDI), economic freedom and economic growth on a panel of four North African countries (Tunisia, Morocco, Algeria and Egypt), over a 5‐year period from 1980 to 2013. Using the System Generalized Method of Moments (GMM) in a panel data analysis, we found strong evidence of a positive link between FDI and economic growth. We also found that economic freedom appears to be working as a complement to FDI and that the effect of FDI is more pronounced in the presence of the economic freedom variable. This means that the countries which promote greater freedom of economic activities benefit more from the presence of multinational corporations (MNCs).
ISSN:1017-6772
1467-8268
DOI:10.1111/1467-8268.12167