Trade and Foreign Exchange Liberalization, Investment Climate and FDI flows in the MENA Countries”

Marie-Ange Véganzonès and Khalid Sekkat

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Abstract: The paper shows the importance of trade liberalization, infrastructure availability and sound economic and political conditions in increasing developing countries attractiveness with respect to FDI. This result is robust to change in the specification. It explains why South Asia, Africa or Middle East and North Africa (MENA) have lagged behind in terms of FDI flows. The paper also shows a much higher impact of trade liberalization on FDI in the manufacturing sector than on total FDI. The message to developing countries' policy makers is twofold. First, efforts towards trade liberalization should be initiated or further increased in order to make most developing countries attractive to foreign investors. Second improvements in other aspects of the investment climate are important complements to trade liberalization and result in additional and sensitive increase of FDI inflows.

Date: 2006
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Published in Review of Development Economics, 2006, A paraître

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00023007

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