首页|Impact of Main Macro-econometric Indicators in Attracting Foreign Direct Investments-Empirical Evidence from Yemen
Impact of Main Macro-econometric Indicators in Attracting Foreign Direct Investments-Empirical Evidence from Yemen
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As most countries in the world, Yemen is working hard to attract more foreign direct investment.But to date, the performance of Yemen in attracting foreign direct investment is very low.So, identifying the key determinants of foreign direct investment is therefore seen as a crucial task for policy makers.This study deals with identifying the main determinants of foreign direct investment inflow in Yemen.This study is conducted to investigate the relationship between FDI and its determinants in the case of Yemen by using the most recent econometric methodology; Johansen and Juselius multivariate cointegradion test and Granger causality based vector error correction model (VECM).Gross Domestic Product, inflation and exchange rate are considered of the important factors that affect FDI inflow to Yemen.These variables are considered as the explanatory variables in this study while the FDI inflow is the dependent variable.As the use of time series analysis to study the dynamics between FDI and itsmacroeconomic determinants has attracted much attention among economists, a secondary data has been collected for the period 1983-2014.By applying the recent econometric tests, this thesis aims to discuss and interpret the results that have been reached through analysis of the data collected for the purpose of study. This paper attempts to examine whether a long-run theoretical relationship does indeed exist between the GDP rate, Foreign Exchange rate, and the level of inflation in Yemen and the amount of FDI received by the country for the past three decades.It also attempts to show anycausality exists between the explanatory variables and the dependent variable and between the explanatory variables themselves.Utilizing series data ranging from 1983 to 2014, we employ time series techniques to answer our research objectives.Our results indicate that there is a long run relationship between the level of GDP and FDI inflow in Yemen, implying that a rise in the level of GDP would have a positive impact on the amount of FDI received by Yemen.In addition,the depreciation of Yemen currency also has a considerable effect in attracting foreign inflow to Yemen.But contrary to inflation theories, inflation level in Yemen for the period 1983-2014 shows insignificant impact on FDI flow to Yemen. A limited number of economic studies have been conducted in Yemen with regards to the macroeconomic policy and how it affects FDI inwards in the country.This study will contribute useful information for Yemen policy makers.And it will be useful as a reference for students andteachers who may wish to do research in this subject area in the future using time series data analysis.
Khadegah Mohammed Abdulkareem Aljonaid
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Foreign direct investment Gross domestic product Exchange rate inflation Yemen
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