The role of foreign direct investment to reduce poverty: The case of Middle Eastern and North African countries

Emerging economies are aimed at achieving economic development by implementing various economic policies. One of the most important indicators of economic development is to reduce poverty. To do so, emerging economies use their factors of production and try to attract foreign direct investment from emerging and developed economies. Considering its role in providing economic growth and development and its importance in reducing poverty, the relationship between foreign direct investments and various macroeconomic variables has been frequently examined in the economics literature, especially in developing countries. This study uses annual data between 1995-2019 and utilized the panel Vector Autoregression (VAR) technique to analyze the role of foreign direct investment to reduce poverty in 12 Middle East and North African countries. The study handles the human development index as a Proxy for the poverty indicator. In addition to the share of foreign direct investment to gross domestic product, we also use the share of natural resource rents to gross domestic product, the unemployment rate, per capita gross domestic product, and trade openness in our analysis. Empirical findings of the study indicate that foreign direct investment plays a significant role to reduce poverty in sample countries.