The effect of macroeconomic variables on direct foreign investments: Study case of Sudan

Foreign direct investment (FDI) is increasingly being recognized as an important factor in the economic development of countries. Foreign direct investment is guided by various theoretical approaches. Theories of FDI provide a guideline, motivation, and direction of FDI application. These theories can either be macro or micro. Macro-level theories of FDI explain various macroeconomic factors that are responsible for FDI uptake. This study, is directed towards identifying the macroeconomic variables and factors that affects the net direct forign investmetns inflows into sudan, and highlights the steps that need to be taken to improve the investment climate to attract more foreign direct investment to sudan. Three macroeconomic variables were selected for the study: Gross Domestic Product (GDP), İnflation and Money Supply (M2). The study used annual time series data set taken from World Bank Group "WBG" starting from 1970 to 2019, ARDL model was used to determine if there is a cointegration between variables, also Error Correction Model "ECM" was used to recognize the short term relationship between variables. According to the analysis results; there is no long-run relationship between variables. While there is a short run positive relationship between both GDP and money supply with the proportional foreign direct investments. Also the results revealed that there is no significant relationship between inflation and proportional foreign direct investments.