The Impact of Agricultural Added Value, Trade Openness and Inflation on FDI: A Time Series Analysis from Saudi Arabia

نوع المستند : أبحاث علمیة متخصصة فی الاقتصاد الزراعی

المؤلفون

1 king saud university street

2 Texas Tech University

المستخلص

Foreign direct investment (FDI) is a powerful tool for driving a diverse range of economic reforms and development in host countries. Yet, research on the determinants, especially in the context emerging economies, appear limited. The purpose is to study the impact of various macroeconomic variables (for example, agricultural added value, inflation, and trade openness) on FDI in Saudi Arabia from 2005 to 2020. This study uses time-series data on FDI, trade openness, agricultural added value, and inflation in Saudi Arabia. The data are on an annual basis and were obtained from the World Bank Indicators for the period 2005–2020. The paper used Vector Autoregression Model and Granger Causality Test to determine the results.The finding indicates that the first lag of FDI, agricultural added value, and trade openness have a statistically significant effect on FDI. The first lag for inflation, on the other hand, has no impact on FDI. The Granger causality test findings show that FDI Granger-causes agricultural added value and vice-versa, FDI Granger-causes trade openness and vice-versa, but inflation does not Granger-cause FDI.The results suggest that there is a two-way causal relationship between agricultural added value and trade openness with FDI, so governments of developing countries should focus on creating a trade-friendly environment.The paper contributes to the literature by providing empirical evidence on the determinants of FDI in Saudi Arabia, highlighting the significant impact of agricultural added value and trade openness on FDI, and emphasizing the importance of fostering a trade-friendly environment for attracting FDI in emerging economies.

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