Resumen de Policies and variables affecting fdi in algeria country

Hadjer Mekki, Yasmine Derradj

• Objective: This study aims to investigate the determinants of Foreign Direct Investment (FDI) in Algeria from 2002 to 2012, focusing on the relationship between FDI and six key economic indicators: Gross Domestic Product (GDP), Inflation Rate, Economic Openness, Political Stability and Security, Real Exchange Rate, and Interest Rate.

    Theoretical Framework: The research builds on international investment and economic development theories, emphasizing the importance of macroeconomic stability and institutional factors in attracting FDI. It integrates models addressing economic openness, exchange rates, and political stability to analyze FDI dynamics.

    Method: A time series econometric approach is applied, using dynamic modeling techniques to capture temporal relationships between FDI and the selected indicators. Data preprocessing ensures quality, while statistical tools are employed to mitigate potential biases.

    Results and Discussion: The analysis finds that economic openness and current political stability have minimal impact on FDI inflows. However, lagged political stability shows marginal significance, indicating that historical stability may influence investment decisions. Inflation and other economic factors significantly shape the investment climate, highlighting their importance.

    Research Implications: The findings provide valuable insights for policymakers and researchers, emphasizing macroeconomic stability and historical political stability as key factors in fostering a favorable FDI environment.

    Originality/Value: This study contributes to the literature with a dynamic econometric analysis of Algeria's FDI determinants, offering new insights into the role of macroeconomic and institutional factors in enhancing investment attractiveness.