Foreign direct investment determinants in Algeria : evidence from vector error correction model

Abstract EN

this study aims to testing and analyzing the macroeconomics variables determinants of the foreign direct investment in Algeria over the period (1980 -2012), using the coiintegration and error correction model technique,, the johansen cointegration test show that a long run relationship exists between FDI and its fundamentals determinants variables such as: inflation rate, degree of openness, real exchange rate and Foreign exchange reserves minus gold.

The error correction model estimations results indicates that the error correction term is negative and statistically significant at 1 % level, the speed of adjustment is about 68 % yearly, also a significant causal relationship from degree of openness and real exchange rate to the FDI is found according to the Granger causality test, however any significant effect from GDP to the FDI is found.