Determinants of foreign direct investment in Tunisia: Empirical assessment based on an application of the autoregressive distributed Lag model

Main Article Content

Teheni El Ghak
http://orcid.org/0000-0001-7918-0195
Abdelkader Zribi
Nadia Zrelli
http://orcid.org/0000-0002-8974-8466
Hazar Temmi

Abstract

In recent years, the changing economic and political environment in Tunisia led to a renewed interest on the drivers of foreign direct investment, given its potential important gains. In this study, we investigated the impact of various factors over the period 1980-2012. In doing this, three categories of determinants were considered: economic, political and sociocultural variables. Empirical findings drawn from the autoregressive distributed lag bounds testing approach show that variation in foreign direct investment inflow in the short-run and long-run is affected by the majority of variables considered, except exchange rate, urban population and gross domestic savings. As a matter of policy, it is essential that government should continue its efforts to create a macroeconomic environment which is attractive to foreign direct investment.

Downloads

Download data is not yet available.

Article Details

How to Cite
El Ghak, T., Zribi, A., Zrelli, N., & Temmi, H. (2017). Determinants of foreign direct investment in Tunisia: Empirical assessment based on an application of the autoregressive distributed Lag model. Economics, Management and Sustainability, 2(1), 43–59. https://doi.org/10.14254/jems.2017.2-1.4
Section
Articles
Author Biographies

Teheni El Ghak, University of Tunis El Manar

Post box 248 - 2092 Tunis El Manar II, Tunisia

Laboratory of International Economic Integration, Faculty of Economic Sciences and Management of Tunis

Abdelkader Zribi, Tunis Business School

  1. Box n°65, Bir El Kassaa 2059, Tunisia

Nadia Zrelli, University of Tunis

4, Rue Abou Zakaria El Hafsi, Montfleury, 1089 Tunis, Tunisia

DEFI ESSECT

Hazar Temmi, University of Tunis El Manar

Post box 248 – 2092 Tunis El Manar II, Tunisia
Laboratory of International Economic Integration, Faculty of Economic Sciences and Management of Tunis

References

Agarwal, J.P. (1980). Determinants of Foreign Direct Investment: A Survey. Weltwirtschaftliches Archive, 116, 739-773.
Aharoni, Y. (1966). The Foreign Investment Decision Process. Boston, MA: Harvard University Press.
Aliber, R.Z. 1971. The Multinational Enterprise in a Multi currency World. In Dunning JH (ed.) The MultinationalEnterprise, (Allen  Unwin: London).
Al-Sadig, A. (2009). The Effects of Corruption on FDI Inflows. Cato Journal, 29(2) Spring/Sumner.
Anyanwu, J.C. (2012). Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries. Annals of Economics and Finance, 13(2), 425–462.
Asiedu, E. (2002). On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?. World Development, 30(1), 107–119.
Azam, M.,  Lukman, L. (2008). Determinants of Foreign Direct Investment in India, Indonesia and Pakistan: A Quantitative Approach. Journal of Managerial Sciences, IV(1). http://www.qurtuba.edu.pk/jms/default_files/JMS/4_1/02_azam.pdf
Baklouti, N.,  Boujelbene, Y. (2014). Impact of Institutional Quality on the Attractiveness of Foreign Direct Investment. Journal of Behavioural Economics, Finance, Entrepreneurship. Accounting and Transport, 2(4), 89-93. http://pubs.sciepub.com/jbe/2/4/2/
Barrell, R.,  Pain, N. (1999). Domestic institutions, agglomerations and foreign direct investment in Europe. European Economic Review, 43(4-6), 925-934.
Behname, M. (2013). FDI Localization, Wage and Urbanization in Central Europe. Comparative study of the evolution of stock returns for listed. Romanian Economic Journal, 16(48), 23-36.
Ben-Taher, G. (2009). The Determinants of Foreign Direct Investment: A Panel Data Study on AMU Countries. Center of International Banking, Economics, and Finance Working paper, November.
Blonigen, B.A, Davies, R.B., Waddell, G.R.,  Naughton, H. (2007). FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment. European Economic Review, 51(5), 1303-1325.
Blonigen, B.A. (2005). A Review of the Empirical Literature on FDI Determinants. Atlantic Economic Journal, 33, 383-403.
Blonigen, B.A. 1995. Explaining Japanese Foreign Direct Investment in the United States. Unpublished Ph. D. Dissertation, University of California, Davis.
Blonigen, B.A.,  Feenstra, R.C. (1996). Effect of U.S. Trade Protection and Promotion Policies. National Bureau of Economic Research, Working Paper No 5285.
Botrić, V.,  Škuflić, L. (2006). Main determinants of foreign direct investment in the southeast European countries. Transition Studies Review, 13(2), 359-377.
Brown, R.L., Durbin, J., Evans, J.M. (1975). Techniques for Testing the Constancy of Regression Relations Over Time. Journal of the Royal Statistical Society, Series B, 37, 149-163.
Buckley, P.J., Clegg, L.J., Cross, A.R., Liu, X., Voss, H., & Zheng, P. (2007). The Determinants of Chinese Outward Foreign Direct Investment. Journal of International Business Studies, 38(4), 499-518.
Busse, M. (2002). Democracy and FDI. HWWA Discussion Paper No. 220.
Campos, N.,  Kinoshita, Y. (2003). Why Does FDI Go Where It Goes? New Evidence from the Transition Economy. IMF Working Paper 03/228 (Washington: International Monetary Fund).
Caves, R. (1971). International corporations: the industrial economics of foreign investment. Economica, 38(149), 1-27.
Chakarabarti, A. (2001). The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions. Kyklos, 54(1), 89-113.
Chaudhary, G.M., Shah, S.,  Bagram, M. (2012). Do Exchange Rate Volatility Effects Foreign Direct Investment? Evidence from Selected Asian Economies. Journal of Basic and Applied Scientific Research, 2(4), 3670-3681. http://www.textroad.com/pdf/JBASR/J.%20Basic.%20Appl.%20Sci.%20Res.,%202(4)3670-3681,%202012.pdf
Cheng, L.K.,  Kwan, Y.K. (2000). What are the Determinants of the Location of Foreign Direct Investment? The Chinese Experience. Journal of International Economics, 51, 379-400.
Cherkaoui, M.,  Naini, A. (2002). Trade Liberalization, Real Exchange Rate and Export Diversification in Selected North African Economies. Paper presented in the Eighth Annual Conference of ERF.
CIA world factbook estimates for 31 December 2013, available at https://www.cia.gov/library/publications/the-world-factbook/rankorder/2198rank.html
Cleeve, E. (2008). How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?. The Journal of Developing Areas, 42(1), 135-153.
Cyert, R.M.,  March, J.G. (1963). A Behavioral Theory of the Firm. Englewood Cliffs.
De Mello, Jr.,  Luiz, R. (1997). Foreign direct investment in developing countries and growth: A selective survey. Journal of Development Studies, 34(1), 1-34.
Demetriades Panicos, O,  Luintel, KB. (1996). Banking sector policies and financial development in Nepal. Oxford bulletin of economics and statistics, 58(2), 355-372.
Driss, S. (2007). L’attractivité des investissements directs étrangers industriels en Tunisie. Région et développement, 25, 137-156.
Dunning, J.D. (1981). Explaining the international direct investment position of countries toward a dynamic or development approach. Weltwirtschaftliches Archiv, 117, 30-64.
Dunning, J.D. (1988).The eclectic paradigm of international production: a restatement and some possible extensions. Journal of International Business studies, 19(1), 1-31.
Dunning, J.H. (2001). The eclectic (OLI) paradigm of international production: past, present and future. International Journal of the Economics of Business, 8(2), 173-190.
Eltayeb, MS.,  Sidiropoulos, MG. (2010). Another look at the determinants of Foreign Direct Investment in MENA Countries: An Empirical Investigation. Journal of Economic Development, 35(12), 75-95. http://www.jed.or.kr/full-text/35-2/5.pdf
Faeth, I. (2009). Determinants of foreign direct investment – a tale of nine theoretical models. Journal of Economic Surveys, 23(1), 165-196.
Fanizza, D, Laframboise, N, Martin, E, Sab, R,  Karpowicz, I. (2002). Tunisia’s Experience with Real Exchange Rate Targeting and the Transition to a Flexible Exchange Rate Regime. IMF Working Paper WP/02/190.
Francis, J, Zheng C,  Mukherji, A. (2009). An institutional perspective on foreign direct investment: A multi-level framework. Management International Review, 49(5), 565-583.
Froot, KA.,  Stein, JC. (1991). Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach. Quarterly Journal of Economics, 106(4), 1191–1217.
Goerlich (1992). Available from www.estima.com.
Graham, E.M. (1978). Transatlantic investment by multinational firms: a rivalistic phenomenon?. Journal of Post Keynesian Economics, 1, 82–99.
Gwenhamo, F. (2009). Foreign Direct Investment in Zimbabwe: The Role of Institutional Factors. Working Paper Number 144.
Haksoon, K. (2010). Political Stability and Foreign Direct Investment. International Journal of Economics and Finance, 2(3), 59-71. http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=E6EF7DBBB2D99798C317344688207ECE?doi=10.1.1.677.1261&rep=rep1&type=pdf
Harris, R.,  Sollis, R. (2003). Applied time series modeling and forecasting. Wiley, West Sussex.
Helpman, E. (1984). A simple theory of international trade with multinational corporations. Journal of Political Economy, 92(3), 451–471.
Hisarciklilar, M., Kayam, S.S.,  Kayalica, O. (2006). Locational Drivers of FDI in MENA Countries: a spatial Attempt. Working Paper, Munich Personal RePEc Archive (MPRA), 1-20.
Holden, D., & Perman, R. (1995). Unit Roots and Cointegration for the Economist. chap. 3, 47-112. In Rao; Cointégration for the Applied Economist. 2ème édition, 256.
Hymer, S.H. (1976). The International Operations of National Firms: A Study of Direct Investment. Cambridge, MA: MIT Press.
Iversen, C. (1935). Aspects of International Capital Movements. (Levin and Munksgaard: London, Copenhagen).
Jabri, A., Khaled, G.,  Ilyes, A. (2013). Determinants Of Foreign Direct Investment In MENA Region: Panel Co-Integration Analysis. The Journal of Applied Business Research, 29(4), 1104-1110.
Jadhav, P. (2012). Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factor. Journal of Social and Behavioral Sciences, 37, 5-14. http://www.sciencedirect.com/science/article/pii/S1877042812007495
Jakobsen, Jo,  de Soysa, I. (2006). Do foreign investors punish democracy? Theory and empirics, 1984–2001. Kyklos, 59(3), 383–410.
Kamaly, A. (2002). Evaluation of FDI Flows into the MENA Region. Economic Department, the American University in Cairo, 1-22.
Karry, Z.,  Toumi, S. (2007). Investissement Direct Étranger et Attractivité Appréciation et enjeux pour la Tunisie. Revue d’Economie Urbaine et Régionale, 3, 479 – 501.
Kemp, P. (1964). Foreign Direct Investment and Economic Growth in Developing Countries: How Relevant are Host country and Industry characteristics?. Kiel working paper no. 1176.
Khan, S.M., & Senhadji, S. (2000). Financial Development and Economic Growth: An Overview. IMF Working Paper wp/ 00/209.
Kindleberger, C.P. (1969). American Business Abroad: Six Lectures on Foreign Direct Investment. New Haven, CT: Yale University Press.
Knickerbocker, F.T. (1973). Ologopolistic Reaction and the Multinational Enterprise. Harvard University Press: Cambridge.
Kok, R.,  Ersoy, A.B. (2009). Analyses of FDI determinants in developing countries. International Journal of Social Economics, 36(1/2), 105-123.
La Porta, R., Lopez-de-Silanes, F., Schleifer, A.,  Vishny, R. (1998). Law and Finance. Journal of Political Economy, 106, 1113-1155.
Lahimer, N. (2006). Investissements directs étrangers et développement en Tunisie : Analyse économétrique à partir du concept du circuit économique. Université Paris Dauphine, centre de recherche : EURISCO.
Li, Q.,  Resnick, A. (2003). Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries. International Organization, 57(1), 175–211.
MacDougall, GDA. (1960). The Benefits and Costs of Private Investment from Abroad: A Theoretical Approach. Economic Record, 36, 13-35.
Markusen, JR. (1984). Multinationals, multi-plant economies, and the gains from trade. Journal of International Economics, 16(3–4), 205–226.
Méon, P.,  Sekkat, K. (2004). Does the Quality of Institutions Limit MENA Integration in the World Economy?. ULB Institutional Repository 2013/7360, ULB – Universite Libre de Bruxelles.
Mhlanga, N, Blalock, G, Christy, R. (2010). Understanding foreign direct investment in the southern African development community: an analysis based on project-level data. Agricultural Economics, 41(3-4), 337-347.
Moosa, I.A. (2002). Foreign Direct Investment: Theory, Evidence and Practice. London: Palgrave.
Mottaleb, K.A. (2007). Determinants of Foreign Direct Investment and Its Impact on Economic Growth in Developing Countries. Journal of Munich Personal RePEc Archive (MPRA) Paper 9457, 1-15.
Narayan, P.K. (2004). Reformulating Critical Values for the Bounds F-statistics Approach to Cointegration: An Application to the Tourism Demand Model for Fiji. Discussion Papers, Department of Economics, Monash University, Australia. https://www.researchgate.net/publication/268048533_Reformulating_Critical_Values_for_the_Bounds_F-_statistics_Approach_to_Cointegration_An_Application_to_the_Tourism_Demand_Model_for_Fiji
Ohlin, B. (1971). Comercio interregional e internacional. Barcelona: Oikos (orig.1933).
Onyeiwu, S. (2003). Analysis of FDI flows to Developing countries: Is the MENA region different?. ERF 10th Annual Conference, December, Marocco.
Onyeiwu, S. (2008). Does Investment in Knowledge and Technology Spur “Optimal” FDI in the MENA Region? Evidence from Logit and Cross-Country Regressions. Proceedings of the African Economic Conference, 161-179.
Peng, M. (2009). Institutions, cultures and ethics. In Peng M (org.); Global Strategic Management. Cincinnati: South-Western Cengage Learning, 90-122.
Pesaran, M.H., Shin, Y.,  Smith, R.J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289–326.
Poelhekke, S.,  Van der Ploeg, F. (2008). Growth, Foreign Direct Investment and Urban Concentration: Unbundling Spatial Lags. DNB Working Papers 195, Netherlands Central Bank, Research Department.
Pournarakis, M.,  Varsakelis, N-C. (2004). Institutions, internationalization and FDI: the case of economies in transition. Transnational Corporations, 13(2).
Ricardo, D. (1817). Principles of political economy. In Saffra P (Ed.) (1951), The Works and Correspondence of David Ricardo 1, Cambridge University Press, London.
Rodríguez, X.,  Pallas, J. (2008). Determinants of Foreign Direct Investment in Spain. Applied Economics, 40, 2443-2450.
Schneider, F. & Frey, B.S. (1985). Economic and political determinants of foreign direct investment. World Development, 13(2), 161-175.
Sekkat, K.,  Véganzonès-Varoudakis, M-A. (2004). Trade and Foreign Exchange Liberalization, Investment Climate, and FDI in the MENA Countries. World Bank Working Paper Series no. 39.
Shamsuddin, A.F. (1994). Economic Determinants of Foreign Direct Investment in Less Developed Countries. The Pakistan Development Review, 33, 41-51. http://www.pide.org.pk/pdf/PDR/1994/Volume1/41-51.pdf
Shirazi, A., Rodrigues, G.,  Karnik, A. (2008). Determinants of Foreign Direct Investment in MENA countries: an empirical analysis. Retrieved from http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1168&context=dubaipaper
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by Cannan E, 1961 and reprinted by Methuen, London.
Thadewald, T.,  Buning, H. (2004). Jarque-Bera test and its competitors for testing normality - A power comparison. Discussion Paper Economics 2004/9, School of Business and Economics, Free University of Berlin.
Thangamani, B., Xu, C.,  Zhong, C. (2011). Determinants and Growth Effect of FDI in South Asian Economies: Evidence from a Panel Data Analysis. International Business Research, 4(1), 43-50. http://www.ccsenet.org/journal/index.php/ibr/article/view/7483
Toumi, S. (2009). Facteurs d’attractivité des investissements directs étrangers en Tunisie. L'Actualité économique, 85(2), 209-237.
Walsh, J.P.,  Yu, J. (2010). Determinants of Foreign Direct Investment: A Sectoral and Institutional Approach. IMF Working Paper, WP/10/187, July.