The Impact of Foreign Direct Investment on Economic Growth: Empirical Evidence from Algeria (1990-2021)

Abstract

This study aims to investigate the impact of foreign direct investment on economic growth in Algeria, based on annual data covering the period (1990-2021). To do this, we use the Autoregressive Distributed Lag (ARDL) co-integration framework, including five variables, which are Gross Domestic Product growth rate (GDPG), foreign direct investment (FDI), gross fixed capital formation (GFCF), inflation as measured by the price index (CP), and the official exchange rate (EXR). The results show the existence of a long-term co-integration relationship between the variables, and a negative statistically significant impact of foreign direct impact of investment on the economic growth rate in Algeria, as a result of the most of these investments being directed towards the extractive sector.