Impact of EU- FDI on Economic Growth in Middle Eastern Countries
This paper develops a simultaneous equations model to test the process of interaction between foreign direct investment, exports and economic growth in three Middle Eastern countries: Egypt, Jordan, Oman, and test for any possible feedback effects. Most of the FDI in these countries flows from the EU. The simultaneous equations model results suggest that higher rates of economic growth result in a greater inflow of foreign capital. The regression results also suggest that interest rate differentials exert a much stronger effect than economic growth on the attraction of foreign capital in the case of Egypt. However, this variable does not seem to play a significant role in the case of Oman. Moreover, the simultaneous equations model results suggest that there is a feedback effect in the relationship between economic growth and capital inflow in all sample countries. A greater inflow of foreign capital leads to growth in the exports of good and services. The expansion in exports leads to growth in GNP, which in turn, encourages the attraction of more foreign capital.
The Foreign Debt Problem of North African Countries
This paper examines the effect of foreign debt servicing on the economic development of three 'heavilu indebted' African countries, namely Algeria, Egypt an Morocco. Single and simultaneous equation models are used to test the interaction between debt servicing and rates of growth in exports, domestic saving, domestic absorption, inflow of foreign capital and outstanding foreign debt. The regression results suggest important feedback effects. Debt servicing had a negative effect on economic growth in each of the sample countries during the period of study (1975-1989). The problem was aggravated by the decline in export and capital flows and by adverse domestic policies which proved to be harmful to domestic savings. The paper argues that sevicing a heavy debt actually worsens the debt problem of the indebtor. LA DETTE EXTERIEURE DES PAYS DE L'AFRIQUE DU NORD RESUME Cette communication etudie I'effet du service de la dette exterieure sur le developpement economique de trois pays africains «lourdement endettes», a savoir I'Algerie, I'Egypte et ie Maroc. Des mises en parallele individuelles et simultanees sont utilisees pour determiner interaction du service de la dette et du taux d'expansion des exportations, de I'epargne nationale, de I'amortissement interieur, de I'afflux de capitaux etrangers et du solde de la dette exterieure. La regression qui en ressort suggere des repercussions considerables. Le service de la dette a eu un effet negatif sur I'expansion economique de chacun des pays envisages pendant la periode consacree a notre etude (1975-1989). Le probleme s'est trouve aggrave par le declin de I'exportation et des afflux de capitaux ainsi que par le contrecoup nefaste de la politique interieure sur I'epargne domestique. Cette communi cation soutient la these selon laquelle le service d'une lourde dette a pour effet d'aggraver le probleme d'endettement du debiteur.
A critique of latent variable tests of asset pricing models
Abstract Latent variable tests of asset pricing models make assumptions about the joint distribution of observable returns and unobservable benchmark returns. These tests can falsely accept models when a mean-variance efficient portfolio other than the benchmark satisfies the distributional assumptions imposed on the benchmark portfolio. Also, because the assumptions are untestable, there is no way to discover whether a model is being rejected because the assumptions are false. Without these assumptions, however, latent variable tests can be viewed only as tests of distributional hypotheses about mean-variance efficient portfolios of unknown composition.