DOES THE ARAB SPRING WAVE AFFECT OUTWARD FOREIGN DIRECT INVESTMENT (FDI)? EMPIRICAL EVIDENCE FROM THE MIDEAST AND NORTH AFRICA

The paper aims to empirically explore the impact of the Arabic Spring on the outflow of FDI in twelve selected countries in the North Africa region (Algeria, Tunisia, Morocco, Libya, Egypt and Mauritania) and the Mideast region (Bahrain, Kuwait, Oman, Lebanon, Jordan and the United Arab Emirates). The paper employs a panel data approach to exploit the time series nature of the relationship between FDI Outwards and its determinants (the market size, trade openness, government effectiveness, inflation and three dummy variables related to the Arab Spring) between 2000 and 2016. The findings revealed that the impact of the Arab Spring estimator is negatively correlated with FDI Outflows in the countries that witnessed the Arab Spring. It implies that conflicts and instability negatively affect FDI outflows. The findings of this study reveal that countries that have been affected by the Arab Spring directly (the North Africa region) experienced a greater decline of FDI outflows than countries that have been indirectly affected (the Mideast region). When the sample is restricted to North Africa it is shown that the FDI outflows may be influenced by the post Arab Spring effect, while there is no such statistically significant effect in the Mideast region. Thus, the study finds that FDI outflows in the North African countries are more determined by the effects of Arabic Spring countries than in the Mideastern countries.