Motives and Determinants of FDI

A VECM Analysis for Oman

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The article examines the motives and determinants of foreign direct investment (FDI) in Oman during the period 1980–2013. It investigates the market size, natural resources, inflation rate, trade openness and government expenditures as factors influencing FDI. Cointegration and vector error correction model (VECM) approach are used to identify the short- and long-run dynamics of the FDI determinants. The Johansen cointegration test reveals an existence of long-run relationship among the FDI determinants. This long relationship indicates that FDI flows in Oman are positively influenced by the market size and natural resources, and negatively by inflation rate and degree of openness. The error correction term suggests that approximately 36 per cent of total disequilibrium in FDI flows was being corrected each year. Moreover, Granger causality results show that there is a unidirectional causality running from each of the market size and natural resources to FDI, indicating that flows of FDI into Oman are characterized by market-seeking and resource-seeking motives.

Original languageEnglish
Pages (from-to)936-946
Number of pages11
JournalGlobal Business Review
Volume16
Issue number6
DOIs
Publication statusPublished - Dec 1 2015

Fingerprint

Vector error correction model
Oman
Foreign direct investment
Natural resources
Market size
Inflation rate
Cointegration test
Cointegration
Granger causality
Resources
Trade openness
Disequilibrium
Causality
Error correction
Openness
Government expenditure
Short-run
Long-run relationship
Influencing factors

Keywords

  • FDI
  • Granger causality
  • Oman
  • VECM

ASJC Scopus subject areas

  • Business and International Management

Cite this

Motives and Determinants of FDI : A VECM Analysis for Oman. / Ibrahim, Omer Ali; Abdel-Gadir, Sufian Eltayeb Mohamed.

In: Global Business Review, Vol. 16, No. 6, 01.12.2015, p. 936-946.

Research output: Contribution to journalArticle

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