Foreign direct investment and domestic investments in Algeria : crowding-in or crowding-out effects ?

Abstract EN

Studies on the relationship between FDI and domestic investment find contradictory results, thus, the objective of this study is to explore whether foreign direct investment (FDI) crowds-in or crowds-out domestic investment in Algeria by using ARDL counteraction technique from the period of 1990-2020.

empirical evidence shows that an inflow of FDI crowds-in domestic investment “DI” in Algeria.

moreover, the marginal effect of economic growth on the domestic investment is significant.

in a more precise way, if growth grows by 1%, domestic investment improves by 1.23%.

furthermore, the coefficient of gross national saving is positive and significant, indicating that a 1% increase in savings leads to a 0.17% increase in domestic investment, meaning that domestic investment is financed by domestic resources.

this causality is coherent with the neoclassical hypothesis that saving is the prerequisite to investing.