Trade and FDI in MENA Region: Panel Causality Analysis

The paper examines the relationship between foreign direct investment(FDI) and international trade for Middle East and North Africa (MENA) region countries so as to assess the validity of FDI-led exports hypotheses in that region. The study uses panel unit root tests and panel cointegration analysis for the period 1970-2010. The results show a strong unidirectional causality running from FDI to trade. The results imply strong support for the FDI-led exports hypothesis. Hence, in general, policies encouraging trade and attracting FDI in MENA region should be promoted so as to support and sustain economic growth in the region.