Assessing the effect of foreign direct investment and foreign trade on the competitiveness of Arab economies: an econometric approach using panel data

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Ismail, M., 2018. Assessing the effect of foreign direct investment and foreign trade on the competitiveness of Arab economies: an econometric approach using panel data. DBA, Nottingham Trent University.

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Abstract

In spite of the Arab region having a comparative advantage in natural resources and other factor endowments such as labour and capital, the region’s competitiveness ranking is weak when judged globally. In particular, inflows of foreign direct investment and foreign trade volumes are not commensurate with what would be expected for this group of countries, given their factor endowments and comparative advantage. The purpose of this thesis is to analyse the low competitiveness rankings obtained by Arab countries, and to analyse the viability of improving this competitiveness by enhancing foreign trade and foreign direct investment in the region. This is a topic that, to the best of our knowledge, has not previously been researched at all for Arab countries in the empirical economics literature.

First, we set out the conceptual underpinnings of competitiveness and the ways in which a country's competitiveness is measured in practice. We then apply Generalized Method of Moments (GMM) in a dynamic panel data model with fixed effects, in order to estimate the effect of foreign direct investment and foreign trade on the competitiveness of Arab countries. The dataset covers 17 Arab countries, spanning the period 1998-2009. We adopt panel data methodology, by applying. The results of the empirical model reveal that FDI inflows and foreign trade both have a positive impact on the competitiveness of Arab economies. In addition, control variables reflecting macroeconomic management in Arab countries such as domestic credit to the private sector, corruption, inflation, labour productivity and nominal exchange rate are found to be significantly and positively related to competitiveness. On the other hand, interaction terms for FDI and trade with economic freedom were found to be insignificant. We then offer policy recommendations, based on these findings.

Item Type:	Thesis
Creators:	Ismail, M.
Date:	2018
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	15 Mar 2018 13:55
Last Modified:	15 Mar 2018 13:55
URI:	https://irep.ntu.ac.uk/id/eprint/32995