Stability, FDI & Growth: Evidence from the MENA region

This study aims to investigate the impact of foreign direct investment (FDI) on the economic growth of the MENA region from 1996 to 2022. It incorporates the world governance indicators (WGI) established by (Kaufmann et al., 2009) to use it as a proxy to reflect the government quality and a channel for activating the efficient role of FDI. I applied Hansen's (2001) and Arellano & Bond's (1991) GMM estimator techniques to deal with the endogeneity between FDI and growth. The study assumes that countries with high political stability are much better at benefiting from FDI and, hence, improve economic growth. The result indicates that political stability is an essential channel to activate the role of FDI, which in turn benefits the region of the MENA countries by improving their economic development.