Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107415
Authors: 
Gammoudi, Mouna
Cherif, Mondher
Year of Publication: 
2015
Series/Report no.: 
Economics Discussion Papers 2015-10
Abstract: 
This paper examines how capital account liberalization (CAL) affects Foreign Direct Investment (FDI) inflows. The authors use the System Generalized-Method-of-Moments (GMM) estimator developed for the dynamic panel model for a sample of 17 Middle East and North Africa (MENA) countries from 1985 to 2009. Their findings reveal that the positive impact of CAL on FDI depends on the political stability in a host country. Furthermore, the results show that enhancing democratic institutions, enforcing property rights, reducing the risk of expropriation and religious tension seem to be some of the most promising policies to attract FDI to the region. The authors also find that foreign investors value the quality of institutions more than the level of corruption or bureaucratic quality in the location choice. Their results are robust to using different indicators of institutional quality. The findings are relevant for MENA countries given that many of them have engaged in a process of liberalization and have weak institutions.
Subjects: 
capital account liberalization
foreign direct investment
institutional quality
GMM-system
JEL: 
C23
D73
F21
F43
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Working Paper

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