Factors Associated with FDI Inflows to MENA Region: An Empirical Examination

T he purpose of the current research was to empirically examine the relationship between six independent variables and foreign direct investment (FDI) inflows (dependent variable) to countries in the Middle East and North Africa (MENA) region for the period of 2002-2016. The independent variables studied in this research were foreign exchange systems, good governance, inflation, gross domestic product, market openness, and doing business. To test the research hypotheses, a two-stage least squares (2SLS) regression was used to analyze the imbalanced pooled data for the years 2002-2016. The hypotheses were tested at 95% confidence level and Eviews produced two-tailed probability T statistics.  Based on the results of the analysis, none of the six hypotheses could be rejected. This result show that good governance, gross domestic product, openness and doing business had a positive relationship in spite of inflation by the negative effect on FDI inflows.  As for foreign exchange region, the result showed that countries with fixed exchange rate system attracted more FDI inflows as compared to the countries with the two-tiered system.