The effect of FDI on domestic investment and economic growth case of three Maghreb countries: Tunisia, Algeria and Morocco

Purpose The purpose of this study is to show how foreign direct investment (FDI) affects domestic investment and economic growth. This study empirically examines this question in the case of three developing countries (Tunisia, Algeria and Morocco). Design/methodology/approach Using the GMM estimator technique, the authors constructed a system with simultaneous equations by three endogenous variables: economic growth (GDP), FDI and domestic investment (DI). Findings The study was a nuance, its results, at the role of investment-growth relationship, are of paramount importance though subtle and slightly different. Originality/value The authors used data from international institutions such as the IMF, UNCTAD, OECD and the World Bank for macroeconomic aggregates. However, the interest rate variables are derived from the central banks of the three countries in the sample. The analysis covers the period from 1980 to 2014.