Sectoral Composition of Outward FDI and its Impact on Export Diversification in Saudi Arabia
Author:
Marwan Othman Ghabban
Abstract: This research explores the relationship between outward foreign direct investment (FDI) and export diversification in emerging economies, with a focus on the case study of Saudi Arabia. Utilizing a multi-equation model and vector autoregression analysis, the study investigates various factors such as the level and sectoral composition of outward FDI, income levels, institutional factors, and regional trade agreements. The findings suggest that while outward FDI can influence export diversification, its impact varies based on factors such as the sectoral distribution of investments, income levels, and institutional quality. Additionally, cointegration and vector error correction models reveal long-term relationships among key variables, highlighting the complex interplay between economic development, governance, and investment patterns. Impulse response analysis sheds light on the dynamic nature of shocks and their effects on the economy over time, emphasizing the interconnectedness of variables. Variance decomposition analysis further elucidates the significance of shocks in explaining fluctuations in model variables, underscoring the systemic interdependencies at play. Overall, the study provides valuable insights into the mechanisms through which outward FDI influences export diversification and economic development in emerging economies like Saudi Arabia and institutional reforms are essential; strengthening institutions and improving regulatory frameworks can amplify the positive effects of outward FDI on export diversification. Keywords: Outward FDI Export Diversification, Emerging Economies, Sectoral Composition, Institutional Factors, Economic Development Download PDF
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Academic Journal of Research and Scientific Publishing
doi.org/10.52132/Ajrsp.e.2024.63.3 