Short-Term and Long-Term Asymmetric Effects of Macroeconomic Variables on Foreign Direct Investment Flows Using the PMG Approach (Case Study: Selected OPEC Member Countries)
Keywords:
Macroeconomic Variables, Foreign Direct Investment, Pooled Mean Group Approach, OPEC Member CountriesAbstract
The motivation behind attracting foreign direct investment (FDI) stems from the widespread belief that beyond providing financial resources, FDI serves additional purposes such as promoting technology transfer, enhancing skills and management practices to improve the quality of the domestic labor force, expanding export markets, raising the standards of domestic production, and facilitating a transition toward a market-based economy. The objective of this study is to analyze and examine the short-term and long-term asymmetric effects of macroeconomic variables on FDI flows in selected OPEC member countries, including Iran, Iraq, Saudi Arabia, Kuwait, Venezuela, the United Arab Emirates, Gabon, and the Republic of the Congo over the period from 2007 to 2022. Accordingly, the Pooled Mean Group (PMG) estimation method within the framework of panel data was employed. The results indicate that the asymmetric effects of trade openness, economic growth, and innovation on FDI flows in both the short and long term are positive and statistically significant for this group of countries. Conversely, the asymmetric effects of exchange rate and inflation on FDI flows in the short and long term are negative and statistically significant. Additionally, the error correction coefficient in the model was estimated to be negative and statistically significant at the 1% level, with a value of -0.43. This implies that the system adjusts toward its long-term equilibrium at a speed of 43%, meaning that in each period, 43% of the existing disequilibria are corrected in the direction of achieving long-term balance.
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Copyright (c) 2024 Mohammed Majeed Rasool Almamar, Saeed Daei Karimzadeh, Mayih Shabeeb Hadhood AL-Shammari, Mostafa Rajabi (Author)
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