The impact of financial liberalization on foreign direct investment : empirical evidence from Algeria

Abstract EN

The topic of the financial liberalization becomes at once a thorny and debatable issue.

This consideration comes from the position held by the financial system in the economic cycle and its paramount effects of smoothing the consumption and the investment decisions.

Liberalizing financial system is a strategy based on alleviating the barriers imposed on the financial system and letting it work according to the market-based discipline as advocated by McKinnon (1973) and Shaw (1973).

This paper attempts to study the impact exercised by the financial liberalization on foreign direct investment in Algeria during the period 2000-2015 by using PLS-SEM approach.

The study concludes that the relationship between financial liberalization and foreign investment is negative, which proves that the foreign investment in Algeria is conducted by other variables than the financial system on one hand, and on the other, the Algerian financial system is not liberalized enough to constitute a solid attractive platform for the foreign investment.