Title: The dynamic causality between FDI inflow and its determinants in Jordan

Authors: Hussain Ali Bekhet; Raed Walid Al-Smadi

Addresses: Graduate Business School, Universiti Tenaga Nasional, 43000 Kajang-Selangor, Malaysia ' Graduate Business School, Universiti Tenaga Nasional, 43000 Kajang-Selangor, Malaysia

Abstract: This paper investigates the long-run and short-run causality among FDI inflows, gross domestic product, energy consumption, economic openness, gross fixed capital formation, labour and financial development in Jordan. Annual time series data for the 1978-2013 periods, the ARDL bounding test and multivariate Granger causality are used. The results identify long-run bidirectional Granger causality running between the variables in all models. In addition, the results show that evidence of short-run Bidirectional causality running from FDI to SMI, from M2 to SM, from EC to GDP, and from EC to GFC are confirmed. Unidirectional causality running from FDI to GDP, from FDI to GFC, from EO to GDP, from EO to EC and from L to M2 existed. In general, Jordanian policy makers concentrate their efforts to attract more FDI by enhancing economic indicators and liberalising the financial market. This is because more FDI in the Jordanian economy is expected to lead to a decrease in economic obstacles (e.g., lower unemployment rate, increased level of technological and managerial skills and increased size of capital).

Keywords: foreign direct investment; FDI; economic growth; energy consumption; financial development; dynamic causality; Jordan; gross domestic product; GDP; economic openness; fixed capital formation; labour.

DOI: 10.1504/IJEBR.2016.074427

International Journal of Economics and Business Research, 2016 Vol.11 No.1, pp.26 - 47

Received: 19 Sep 2015
Accepted: 26 Oct 2015
Published online: 29 Jan 2016 *

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