An Examination of impact of infrastructure on Foreign Direct Investment: The Role of Institutional Quality in MENA Region from (2000-2020)

Abstract

Foreign direct investment has become one of the tools for many developing countries in recent years to enhance overall economic growth. The aim of this study is to empirically examine the impact of infrastructure indictors on FDI using institutional quality as moderator in 15 counties from MENA Region from 2000 till 2020. Initially, Principal component analysis (PCA) was utilized to construct composite indicator for infrastructure, furthermore dynamic generalized least square (GLS) was applied to assess the impact of infrastructure on FDI. The results showed that there is a negative and significant relationship between infrastructure and FDI in the MENA Region. The study recommends policymakers should focus on strengthening the quality of infrastructure as one aspect in attracting FDI, besides considering how investment gap associated with infrastructure growth could impact FDI inflow