Foreign Direct Investment, Financial Development and Economic Growth in MENA Countries

Abstract

This study is an effort to explain and establish a relationship among foreign direct investment (FDI), financial development and economic growth on a panel of 7 MENA countries (Tunisia, Morocco, Algeria, Egypt, Oman, Qatar and United Arab Emirates) from 2008 to 2022. Using the system Generalized Method of Moments (GMM) in a panel data analysis, we found that FDI has a positive effect on economic growth. We also found that financial development appears to be working as a complement to FDI. The policy implications of this study appeared clear. Improvement efforts need to be driven by local-level reforms to ensure the development of domestic financial system in order to benefit more from the significant inflows of FDI.