Does The Foreign Direct Investment Affect Economic Growth in Jordan in Light of Commercial Openness
DOI:
https://doi.org/10.26668/businessreview/2023.v8i5.2088Keywords:
Economic Growth, Trade Openness, Foreign Direct Investment, JordanAbstract
Purpose: This paper aims to examine the effect of foreign direct investment on economic growth in Jordan in light of the trade openness, during the period from 1999 to 2019.
Theoretical Framework: This paper discusses how Jordan, as a developing country, has worked over the years to attract foreign investment by creating an environment of incentives, benefits, and legislation that encourages such investments; taking advantage of low local labor wages, high administrative costs, and great commercial openness.
Design/methodology/approach: To achieve the objectives of the study and to construct the statistical model the study used analytical methodology. The following statistical methods were applied; Hausman, Wald Test, F-Test Statistic, Granger, Multicollinearity test, Normality Test, Lagrange Test, Multiplier Test, and Causality Test.
Findings: After conducting the analysis tests, the results showed a statistically significant impact of open trade direct investment on economic growth, Moreover, findings showed a positive impact on the degree of economic growth, whenever the degree of trade openness and the flow of foreign investment increase.
Research, Practical & Social implications: The independent variables in the study model were measured by the ratio of foreign direct investment from the nominal GDP. The variable (the degree of trade openness) was expressed as the ratio of exports and imports to trade volume. The generalized Method of Moments (GMM) was used in this study.
Originality/value: In light of Jordan's extensive commercial openness, This investigation looked at the impact of FDI on economic expansion. The study's findings are in line with theoretical research and other studies that hold that a country's level of economic growth is not adversely affected by significant trade openness because foreign investments are not less effective.
Downloads
References
Abu Mudallala, S. M. and I. S. A.-M. (2018). Economic Openness and its Impact on Economic Growth: An Analytical Study of the Hashemite Kingdom of Jordan for the Years 1995 - 2015. Al Balqa Resarch and Studies Journal, 2(21), 25–48.
Akayleh, F. Al. (2014). Impact of trade openness on economic growth in a small, open, and developing economy: new instrumental variables for trade openness. International Journal of Sustainable Economy, 6(2), 142. https://doi.org/10.1504/ijse.2014.060346
Al-Qadi, S .N ., Malahim, S.S ., & Matar, M. S. . (2023). Impact of COVID-19 Pandemic on Unemployment: Case Study - Jordan’s Tourism Sector. Jordan Journal of Business Administration, 19(2). https://doi.org/10.35516/jjba.v19i2.1046
Bakari, Sayef and Fakraoui, Nissar and Tiba, S. (2019). Munich Personal RePEc Archive The Nexus among Domestic Investment , Taxation , and Economic Growth in Germany : Cointegration and Vector Error Correction Model Analysis (Issue 96655).
Bakari, Sayef and Mabrouki, M. (2018). Munich Personal RePEc Archive The impact of Education on Economic Growth in Palestine : 1990-2014. In MPRA Paper (Issue 89749).
Bakari, S., & Tiba, S. (2019). The impact of trade openness, foreign direct investment and domestic investment on economic growth: New evidence from asian developing countries. Economic Research Guardian, 9(1), 46–54.
Balassa, B. (1978). Exports and economic growth. Further evidence. Journal of Development Economics, 5(2), 181–189. https://doi.org/10.1016/0304-3878(78)90006-8
Blonigen, B. A. (2019). Foreign direct investment. Foreign Direct Investment, May, 1–538. https://doi.org/10.1142/11176
Busse, M., & Hefeker, C. (2011). Political Risk, Institutions and Foreign Direct Investment. In SSRN Electronic Journal. https://doi.org/10.2139/ssrn.704283
Davis, G. C. (2001). 476 the Review of Economics and Statistics. 19(1995), 476–480.
Dutta, C. B., Haider, M. Z., & Das, D. K. (2017). Dynamics of Economic Growth, Investment and Trade Openness: Evidence from Bangladesh. South Asian Journal of Macroeconomics and Public Finance, 6(1), 82–104. https://doi.org/10.1177/2277978717695150
ERKİŞİ*, K. (2018). Foreign Direct Investment, Trade Openness and Economic Growth, A CASE OF TURKEY. The Academic Eleganc, 50(2), 73–84. https://doi.org/10.1177/0015732515572055
Fedderke, J. W., & Romm, A. T. (2006). Growth impact and determinants of foreign direct investment into South Africa, 1956-2003. Economic Modelling, 23(5), 738–760. https://doi.org/10.1016/j.econmod.2005.10.005
Froot, K. A., & Stein, J. C. (1991). Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach. The Quarterly Journal of Economics, 106(4), 1191–1217. https://doi.org/10.2307/2937961
Giles, D. E. A., & Stroomer, C. N. (2006). Does trade openness affect the speed of output convergence? Some empirical evidence. In Empirical Economics (ISSN 1485-6441; Vol. 31, Issue 4). https://doi.org/10.1007/s00181-006-0060-y
Graebner, M. E., Heimeriks, K. H., Huy, Q. N., & Vaara, E. (2017). The process of postmerger integration: A review and agenda for future research. Academy of Management Annals, 11(1), 1–32. https://doi.org/10.5465/annals.2014.0078
Gray, G. (2014). the Economic Impact of Trade Openness on Foreign Direct Investment Into Emerging Market Countries . (Issue November). UNIVERSITY OF KWAZULU-NATAL.
International Montary Fund. (2003). Annual Report. In Fresenius.Com (Issue December). https://www.rtda.gov.rw/fileadmin/templates/publications/RWANDA_Annual_Report_2018-2019_SHARING.pdf,
Irwin, D. A., & Terviö, M. (2002). Does trade raise income? Evidence from the twentieth century. Journal of International Economics, 58(1), 1–18. https://doi.org/10.1016/S0022-1996(01)00164-7
Lee, K. J., Fariza, B., & Sharipova, Z. (2015). The Relationship between FDI, Diversification and Economic Growth in Natural Resource Oriented Countries: Case of Kazakhstan. Journal of International Business and Economics, 3(2), 51–62. https://doi.org/10.15640/jibe.v3n2a4
Malahim, S.S., Abu Hamour, A.M., Al-Zoubi, W.K., Hyasat, E.A., Maharmah,M.H., Alali, S. M. (2022). The Impact of Earnings Management Practices on the Market Value of Industrial Companies Listed on the Amman Stock Exchange: Evidence from Jordan, WSEAS Transactions on Business and Economics, 19, 1613-1620. DOI: 10.37394/23207.2022.19.145
Maradana, R. P., Pradhan, R. P., Dash, S., Gaurav, K., Jayakumar, M., & Chatterjee, D. (2017). Does innovation promote economic growth? Evidence from European countries. Journal of Innovation and Entrepreneurship, 6(1), 1–23. https://doi.org/10.1186/s13731-016-0061-9
Müller, G., Goldbach, C., & Mizan, A. N. (2017). HOCHSCHULE RHEIN-WAAL RHINE-WAAL UNIVERSITY OF APPLIED SCIENCES FACULTY OF SOCIETY AND ECONOMICS Trade Openness and Economic Growth-A Panel Data Analysis on Selected Developing Countries From 1998-2017. HOCHSCHULE RHEIN-WAAL RHINE-WAAL UNIVERSITY OF APPLIED SCIENCES.
OECD. (2008). OECD Benchmark Definition of Foreign Direct Investment. In OECD Benchmark Definition of Foreign Direct Investment (Fourth Edi). oced organization. https://doi.org/10.1787/9789264064805-en
OLABISI, O. E. (2016). Causality Testing Between Trade Openness , Foreign Direct Investment and Economic Growth : Fresh Evidence From Sub-Saharan African Countries. International Economic Journal, 71(4), 437–464.
Sane, M. (2016). Determinants of Foreign Direct Investment Inflows to ECOWAS Member Countries: Panel Data Modelling and Estimation. Modern Economy, 07(12), 1517–1542. https://doi.org/10.4236/me.2016.712137
Singh, H., & Jun, K. (1999). Some new evidence of foreign direct investment in developing countries. In Policy Research Working Paper (Issue November 1995).
Soltani, H., & Ochi, A. (2012). Foreign Direct Investment (FDI) and Economic Growth: an approach in terms of cointegration for the case of Tunisia. Journal of Applied Finance & Banking, 2(4), 193–207. http://www.scienpress.com/Upload/JAFB/Vol 2_4_13.pdf
Walsh, J. P., & Yu, J. (2010). Determinants of Foreign Direct Investment: A Sectoral and Institutional Approach IMF Working Paper Asia Pacific Department Determinants of Foreign Direct Investment: A Sectoral and Institutional Approach. In Imf (WP/10/187). https://www.imf.org/external/pubs/ft/wp/2010/wp10187.pdf
Wong, K. N., & Tang, T. C. (2007). Foreign direct investment and electronics exports: Exploratory empirical evidence from Malaysia’s top five electronics exports. Economics Bulletin, 6(14).
Yanikkaya, H. (2003). Trade openness and economic growth: A cross-country empirical investigation. Journal of Development Economics, 72(1), 57–89. https://doi.org/10.1016/S0304-3878(03)00068-3
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Mashhour Hathloul Maharmah

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Authors who publish in this journal agree to the following terms: the author(s) authorize(s) the publication of the text in the journal;
The author(s) ensure(s) that the contribution is original and unpublished and that it is not in the process of evaluation by another journal;
The journal is not responsible for the views, ideas and concepts presented in articles, and these are the sole responsibility of the author(s);
The publishers reserve the right to make textual adjustments and adapt texts to meet with publication standards.
Authors retain copyright and grant the journal the right to first publication, with the work simultaneously licensed under the Creative Commons Atribuição NãoComercial 4.0 (http://creativecommons.org/licenses/by-nc/4.0/), which allows the work to be shared with recognized authorship and initial publication in this journal.
Authors are allowed to assume additional contracts separately, for non-exclusive distribution of the version of the work published in this journal (e.g. publish in institutional repository or as a book chapter), with recognition of authorship and initial publication in this journal.
Authors are allowed and are encouraged to publish and distribute their work online (e.g. in institutional repositories or on a personal web page) at any point before or during the editorial process, as this can generate positive effects, as well as increase the impact and citations of the published work (see the effect of Free Access) at http://opcit.eprints.org/oacitation-biblio.html