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 IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN JORDAN
Foreign direct investment (FDI) is assumed to be benefiting a poor country like Jordan. Jordan offers attractive investment opportunities for foreign companies and has adopted a number of policies to attract foreign direct investment into the country. This paper focuses on the FDI-led growth hypothesis in the case of Jordan. The study is based on time series data from 1990 to 2009. The econometric framework of ciontegration and error correction mechanism was used to capture two way linkages between variables interest. An econometric result shows that FDI inflows do not exert an independent influence on economic growth. And also the impact of DIN and TP on GDP growth rate is found to be positive. Based upon these results the ultimate objective of the Jordan government is to attract FDI for development an appropriate policy mix is necessary to be taken in the future.
A Strategy for Efficient Debt Reduction
F or the past seven years, the U.S. government has managed the debt crisis with the preeminent goal of sustaining the flow of debt servicing payments from the debtor countries to the commercial banks. The focus on the banks, especially in the first years of the crisis (1982–85), is easily explained. Several money-center banks had exposure of nearly 200 percent of bank capital in Latin America alone upon the outbreak of the crisis in 1982. A widespread suspension of debt-service payments could well have sunk several major banks. I have discussed the U.S. government's policy focus on the debt servicing to the commercial banks in Sachs (1986b, 1989c) and Sachs and Huizinga (1987). But today, those policies are being revised. After years of steady decline in the exposure ratios of the most heavily exposed banks, the risk of a U.S. banking crash as the result of the debt crisis is now virtually nonexistent. In addition, the burden of debt payments is contributing to profound economic crises and growing political instability in almost all of the democracies in Latin America. A wide range of analysts now concurs that the debt burden should be reduced, not only for the sake of the debtors, but also for the sake of the creditors, who have an important long-run stake in allowing the developing countries to surmount the current acute crisis. The Brady plan, unveiled by Secretary of Treasury Nicholas Brady in March 1989, is based on the need for a reduction of the debt burden.