Foreign direct investment determinants in an oil abundant host country: Short and long-run approach for Saudi Arabia

Abdullah Abdulmohsen Alfalih and Bel Hadj Tarek

Resources Policy, 2020, vol. 66, issue C

Abstract: This paper explores the factors that determine the FDI inflows in an oil abundant host country. The approach followed in our study allow us to check short- and long-run validity of the resource curse not only in terms of the abundance of resources but also in terms of their cost. Moreover, our study investigates short- and long-run policies that can serve an oil-rich country in order to benefit from resource-based FDI and move to becoming a country that is not dependent on oil resources. Results based on the ARDL approach applied to the case of Saudi Arabia during the period 1984–2017 show that the effects of oil factors, macroeconomic factors, infrastructure, and law and order differed according to the time horizon. The findings indicate that the size of markets, the real exchange rate, and law and order have positive effects on FDI, over short- and long-run periods. The results of short-run VECM modelling and long-run cointegration reveal that FDI inflows in Saudi Arabia are stimulated by a rise in the price of oil price over the short run, and openness over the longer term. Oil exports have no impact on short or long-run FDI. Consequently, inflow of FDI in an oil abundant host country is more sensitive to cost and not to the abundance of resources.

Keywords: Oil resources; Oil price; Foreign direct investment; ARDL; Saudi Arabia (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420719307664
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:66:y:2020:i:c:s0301420719307664

DOI: 10.1016/j.resourpol.2020.101616

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().