Exploring the influence of sustainable economic growth and unemployment on FDI: evidence from Saudi Arabia

Foreign direct investment (FDI) is essential for promoting sustainable economic development, especially in developing countries such as Saudi Arabia, by enhancing productivity and competitiveness. This study explores the impact of FDI and unemployment on sustainable economic growth in Saudi Arabia, focusing on data from 1991 to 2022. FDI enhances productivity and competitiveness, while unemployment hinders growth. Understanding the interplay between FDI, unemployment, and economic growth is crucial for understanding modern economic systems. The research aims to understand the relationship between FDI and unemployment in Saudi Arabia. With the help of impulse response functions and variance decomposition analysis, the study shows how changes in foreign direct investment affect GDP, unemployment, and CO2 emissions over time. The impulse response analysis shows that a sudden drop in foreign direct investment has a positive and long-lasting effect on GDP but a negative effect on unemployment that lowers unemployment rates over time. Still, CO2 emissions have slightly gone up in response to FDI. This suggests that while FDI may help the economy grow, it may also make environmental problems worse. Over time, the variance decomposition results show that FDI gradually explains a larger part of the variation in GDP, while unemployment's effect on GDP decreases. This highlights how important FDI is for boosting economic growth. This research enhances the current body of knowledge about the correlation between foreign direct investment, unemployment, and sustainable economic growth. The findings indicate that governments ought to cultivate a favorable climate for foreign direct investment while enacting initiatives to mitigate unemployment. The report promotes a balanced strategy that utilizes FDI to foster economic growth while considering its environmental consequences to guarantee sustainable development in Saudi Arabia.