Title: Threshold effect of foreign direct investment on economic growth: new evidence from a panel regime switching models

Authors: Kamel Helali; Maha Kalai

Addresses: Research Laboratory in Competitiveness, Commercial Decisions and Internationalisation (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road km 4.5, B.P. 1088-3018, Sfax, Tunisia ' Research Laboratory in Competitiveness, Commercial Decisions and Internationalisation (CODECI), Faculty of Economics and Management of Sfax, University of Sfax, Aerodrome Road km 4.5, B.P. 1088-3018, Sfax, Tunisia

Abstract: The article contributes to the existing literature by examining the nonlinear effect of foreign direct investment (FDI) on the development of the Arab Maghreb Union (AMU) countries during 1980-2019. These countries multiply their FDI attraction policies in order to enrich the national externalities offered to local businesses and benefit from some positive effects on their economy in terms of growth, technology, know-how, etc. Using panel smooth transition regression (PSTR) model and panel smooth transition autoregressive (PSTAR) models, our findings reveal that the FDI shows opposite effects below and over the estimated threshold. This highlights the asymmetrical effect of unforeseen shocks on its volatility. Policy implications are also discussed.

Keywords: foreign direct investment; FDI; economic growth; Arab Maghreb Union; AMU; panel regime switching model.

DOI: 10.1504/GBER.2021.118212

Global Business and Economics Review, 2021 Vol.25 No.2, pp.177 - 205

Received: 24 Jan 2021
Accepted: 15 Apr 2021

Published online: 29 Sep 2021 *

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