Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

This paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector‐specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary a...

Full description

Saved in:
Bibliographic Details
Published in:Australian economic papers 2023-12, Vol.62 (4), p.668-692
Main Authors: Bergougui, Brahim, Murshed, Syed Mansoob
Format: Article
Language:English
Subjects:
Economic growth
Foreign investment
GDP
Generalized method of moments
Gross Domestic Product
Innovations
MENA region
multiple imputation
sectoral FDI
sectoral growth
Service industries
Spillover effect
system GMM
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector‐specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary and tertiary and examine their individual impact on growth, as well as their sector‐specific spillovers by using dynamic panel GMM methodology. We find prima facie evidence that total FDI significantly stimulates growth. However, when we turn to the disaggregated FDI data, primary sector FDI adversely affects the gross domestic product (GDP) growth in the service sector and overall GDP growth. On the other hand, secondary FDI has a ‘double‐edged’ effect, benefiting its own sector (the service sector's GDP growth), but not other sectors. In contrast, service sector FDI stimulates GDP growth in mining, manufacturing and service sectors, thereby enhancing overall economic growth. Our findings have important policy implications regarding the incentives provided by governments to encourage FDI, which need to be fine‐tuned to attract certain types of FDI (tertiary), with less focus on the primary sector
ISSN:0004-900X
1467-8454
DOI:10.1111/1467-8454.12320