Determinants of Resource-Seeking Foreign Direct Investment: Co-Integration and Causality Analysis for Saudi Arabia
Mohammad Hanif Akhtar *
Department of Finance and Accounting, Prince Sultan University, Riyadh, Saudi Arabia
Mohammad Bashir Khan
Department of Government and Public Policy, National Defence University, Islamabad, Pakistan
Shahzad Hussain
Department of Government and Public Policy, National Defence University, Islamabad, Pakistan
*Author to whom correspondence should be addressed.
Abstract
Although, a vast amount of literature has emerged on determinants of FDI across the globe, yet research in a Saudi Arabian context remains limited. This study is an attempt to fill this gap where determinants of resource-seeking FDI are analyzed over a period of 30 years. The study uses Johansen tests of cointegration to find out the effect of hypothesized variables as determinants of resource-seeking FDI. In order to determine a causal link among the tested variables, a Granger causality test is also conducted. On overall basis, it can be concluded that the resource-seeking FDI in the country is mainly driven by greater trade openness, resilient fiscal performance and existence of greater oil reserves.
Keywords: Foreign direct investment, determinants, cointegration analysis, granger causality tests, Saudi Arabia