Impact of Foreign Investment in the Yemen's Economic Growth: The Country Political Stability as a Main Issue

Abstract

This paper investigates the moderating role of political stability in the Foreign Direct Investment (FDI) inflows into Yemen over the last two decades. Augmented Dickey Fuller (ADF) test was employed to check the stationary of the data. Following the ADF test, the standard and hierarchal regression approaches were used for the analysis. The standard regression results show that the GDP growth rate has significant negative effects on FDI inflows into Yemen while exchange rate, inflation rate, balance of payment, and gross national income have no effect on the FDI inflow in the country. However, when the moderating variable, political stability is used together with other variables such as exchange rate, inflation rate, balance of payment and gross national income, the results of hierarchical regression indicate that these variables are important determinants of FDI inflows into the country. Therefore, the results suggest that political stability is critical for the future growth of Yemen economy.

The Macroeconomic Determinants and the Impact of Sanctions on FDI in Iran

“…The GDP growth rate is a measure of the country's economic performance. The national economic development can be determined by criteria such as the amount of production, consumption, quality, diversity of goods, and other economic indicators (Musibah et al, 2015). The growth of GDP can be a determinant of FDI inflows to countries (UNCTAD, 1998).…”

“…This is because the devaluation of the domestic currency against the value of the foreign currency will make the investment less expensive for a foreign investor in the host country. However, depreciation of the domestic exchange rate will stimulate foreign direct investment inflows to that country (Musibah et al, 2015). On the other hand, if the value of a country's currency is decreasing, foreign investors are encouraged to buy assets at lower prices in that country (Blonigen & Ma, 2011).…”

“…Depending on the levels of economic, social, and political development, there is much literature on determinants of the FDI inflows (for example, Stack et al, 2017;Villaverde & Maza, 2015;Naude & Asiedu, 2002). There are studies on market size and growth (Bevan & Estrin, 2004); availability of natural resources (e.g., Elheddad, 2017); skilled and qualified human capital (e.g., Kar 2013;Ndeffo, 2010); quality of infrastructure (Cheng & Kwan, 1999) and government policies (Cleeve, 2008); governance quality (Abdioglu et al, 2013) and political stability (Cleeve, 2012;Musibah, 2015). Therefore, these factors might help countries with slow or high economic growth.…”

Faktor Faktor Yang Mempengaruhi Investasi Asing Langsung di Indonesia

“…Nilai tukar berpengaruh terhadap investasi asing langsung (Sharif & Mirfatah, 2012;Rashid et al, 2016;Goh & Wong, 2011;Vijayakumar & Sridharan, 2010;Majidi et al, 2017). Nilai tukar tidak berpengaruh terhadap investasi asing langsung (Musibah et al, 2015;Adriana, 2016). Penelitian dilakukan di Indonesia dengan obyek penelitian perusahaan manufaktur di Indonesia, hasil penelitian bahwa nilai tukar berpengaruh negatif terhadap investasi asing langsung di Indonesia (Ramadhani et al, 2015).…”

Role of Sanctions and Macroeconomic Determinants on FDI Inflow: A Case Study

“…Elheddad, 2017); skilled and qualified human capital (e.g. Kar 2013; Ndeffo, 2010; Lewin et al, 2009); quality of infrastructure (Cheng & Kwan, 1999); and government policies (Cleeve, 2008); governance quality (Abdioglu et al, 2013); and political stability (Cleeve, 2012;Musibah, 2015). Therefore, these factors might help countries with slow or high economic growth.…”