The gravity model and fdi in Algeria

Abstract EN

This paper estimates the determinants of foreign direct investment flows using the gravity equation in Algeria, and controlling the importance of each of the traditional gravity variables (size, common borders, distance, and common language) and other institutional variables such as landlock Ness and government effectiveness to foreign direct investment flows to know the efforts made by Algeria to attract it and raise the volume of its flows necessary for the development of its national economy.

The study aimed to determine the usefulness and feasibility of foreign direct investment in the host countries and to evaluate the performance of foreign direct investment and its role in the growth of GDP in Algeria during the period (2011-2020) in order to determine the factors that determine the decision of multinational companies to establish new foreign branches in Algeria.

The study concluded that foreign direct investment has an influential role in economic growth (Gross National Product), and this is consistent with the logic of economic theory, as it appears in the empirical results that prove the validity of the hypothesis that the model variables are important determinants of foreign direct investment flows.