Comparative Analysis of the Determinants of Foreign Direct Investments in Morocco and Türkiye

Abstract

Foreign Direct Investments (FDI) can have a positive effect on the development of the economic and social potential of emerging countries provided that they make efforts to attract appropriate investors. Among developing countries, we are interested to analyze FDI attractiveness in Türkiye and Morocco and proceed with a comparative analysis between these two countries.

Very few empirical studies present an overview of FDI determinants and how they can influence the FDI attractiveness of Türkiye and Morocco separately. Consequently, the contribution of this paper is to compare FDI inflows in these countries and then identify the determinants that impact their FDI attractiveness. For this purpose, we used an ARDL econometric model in both countries over the period 1980 to 2020.

Our results show that there is an important similarity between the impacting factors on FDI flows in the short run in both countries. Openness and inflation have positive effects in both countries, while market size has a negative impact on FDI attractiveness. Credit, however, has a positive effect only in Türkiye but no significance in Morocco. On the other hand, there is less similarity between Türkiye and Morocco in the long run, since only GDP has a significant and positive impact in both countries. Inflation has a significant and negative impact only in Morocco, and human capital is positively impactful only in Türkiye, while openness and credit have a significant and negative impact also only in Türkiye. This difference between the long-run results in both countries shows that FDI determinants play a more effective role in attracting FDI inflows in Türkiye than in Morocco, which substantiates the difference in the level of FDI inflows that each country gets.