Foreign direct investment and domestic investment: Do oil sectors matter? Evidence from oil-exporting Gulf Cooperation Council economies

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Abstract

This article investigates the impact of sectoral foreign direct investment (FDI)on public and private domestic investment (DI)using a unique dataset of greenfield FDI inflows to six oil-exporting economies of the Gulf Cooperation Council (GCC)during 2003–2013. After controlling for some econometric issues and macroeconomic determinants of DI, there are two main findings. First, aggregate estimations show that FDI inflows contribute significantly to public DI but discourage private DI. Conversely, FDI outflows promote private domestic economic activities but negatively affect public DI. Second, disaggregated data illustrates that greenfield FDI inflows to the oil sector yield a significant and positive effect on public DI; a 1% increase in oil FDI leads to about a 0.6% improvement in public DI. Non-oil FDI has an ambiguous effect on DI. All the results are robust.

Original languageEnglish
Pages (from-to)1-12
Number of pages12
JournalJournal of Economics and Business
Volume103
Early online date23 Nov 2018
DOIs
Publication statusPublished - 1 May 2019
Externally publishedYes

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