The effects of foreign direct investment on the economic growth of the mediterrean countries: case of Morocco and Turkey

Purpose of this research is to analyze the impacts of foreign direct investment on the economic growth of the Mediterranean countries: Comparison cases of Morocco and Turkey. The study aims to unveil if the FDI has always a positive impacts on the economic growth and showing by a comparative analysis the effects of foreign direct investment on the economic growth between Morocco and Turkey. The study was done by using the panel data between the period 1990-2016 and by utilizing the Vector Error Correction Model (VECM) methodology.The collected data from the world bank of the both countries were analyzed by using the tools, the Augmented Dickey Fuller (ADF) test ,then Johansen test for Cointegration, there after VECM, and finally Impulse Response Function (IRF).The ADF test results indicate that all variables became stationary after taking the first difference, and they be integrated of order one I (1). Johansen Cointegration test results means that these four variables have a long run association shape, which argue the existence of a cointegration among the variables. In Morocco, Normalised long run estimates indicated FDI has a significant negative connection with economic growth, while the export and investment were found to have a significant positive impact on the economic growth. However, Labor has an insignificant negative impact on the economic growth, though statistically insignificant. From the estimated short run, it noticed that most of the variables are statistically insignificant .Impulse response function displayed that the reaction of a shock on foreign direct investment and export was positive, whereas the reaction to a shock in force labor and investment was negative. On the other hand, in Turkey, Normalised long run estimates showed. That all the variables have a significant positive linkage with economic growth. From the estimated short run, it has shown that most of the variables are statistically insignificant.