Foreign direct investment and economic growth in Algeria : an application of auto-regressive distributed LAG (ARDL)‎ bounds testing approach

Abstract EN

Recent empirical literature suggests that foreign direct investment (FDI) have positive impact on economic growth through the process of technological diffusion.

This paper proposes a new approach to testing for the existence of a relationship between foreign direct investment (FDI) and economic growth in Algeria for the analysis of long-run relations over the period of 1980-2014.

The empirical analysis in this study is based on the bounds testing approach of cointegration, is introduced originally by (Pesaran & Shin, 1999) and further extended by (Pesaran & al, 2001), In order to verify the relationship between Foreign Direct Investment and economic growth in Algeria.

The results suggest that FDI have a positive impact on economic growth in the long-run.

The results further suggest FDI can be deemed to be catalysts for economic growth in Algeria an increase in one unite in FDI leads to increase by 5% in GDP.