Our Publications

Dhaman Working Papers

WPS

 

We are pleased to announce the launch of Dhaman Working Papers which describe research in progress by the Research & Country Risk Department and are published to elicit comments and to encourage debate. Of course, the views expressed in Dhaman Working Papers are those of the author(s) and do not necessarily represent the views of Dhaman, its Executive Board, or Dhaman management.

 


WP/2019/01: Does FDI Affect Growth in MENA Countries? A Semi-Parametric Fixed-Effects Approach

 

Abstract: It is often asserted with confidence that foreign direct investment (FDI) is beneficial for economic growth especially in the host developing economy. Nevertheless, there is no empirical consensus on a positive effect of FDI on host-country growth, nor on the direction of causation. One of the reasons behind the lack of consensus is likely the presence of nonlinearities in FDI and growth relationship. Most of the previous studies either used the linear empirical growth model or tried to bypass the nonlinearity issue by using ad hoc procedures. However, it is also true that growth theory provides little guidance about the exact nature of nonlinearity. Consequently, it is almost impossible to determine the exact form of nonlinear specification that would be appropriate for all data sets and data ranges. Our paper investigates this challenging question in empirical growth literature that is the impact of FDI in promoting economic growth in developing economies without adopting any ad hoc procedure to capture the nonlinearity in FDI-growth relationship. Based on a dualistic growth framework originally developed by Feder (1982) and partial linear regression approach, we are able to separate measure for sector externality and factor productivity effects between the two sectors (exports and non-exports sector). We define sectoral externality, as a function of real FDI stocks per capita. Thereby, our theoretical framework allows us to capture both direct and as well as indirect effects of FDI on economic growth across 8 MENA countries during the period 1990-2016.
 
Author: Riadh Ben Jelili

 



WP/2018/02: Has Export Credit Guarantee Any Role in Promoting Exports in Arab Countries?

 

Abstract: Limitations on the availability of timely and affordable trade financing, including export credit guarantee, are contributing to modest trade growth during the last five years, therefore it must be a matter of priority to improve our understanding of the linkages between financing/risk mitigation and trade activity, ensuring adequate levels of the former, to help fuel growth of the latter.
The existing research works on the effects of export credit insurance on export promotion mostly are concentrated around several European countries. Yet nothing is known about the influence of export credit guarantees on exports in the Arab region, where the structure of export industries and key trading partners significantly differ from other regions. The purpose of this paper is to bridge this gap by investigating empirically the significance of the relationship between exports and credit-worthiness of importing countries, using Arab merchandise export values. Corroborating evidence for such relationship gives support to the usefulness of specialized export financial institutions to finance exports, mitigate credit risk and keep trade finance markets in Arab countries from drying up. A dynamic panel approach is adopted to estimate an adjusted gravity model. The empirical results, based on a balanced panel of 107 Arab partner countries (importer countries) observed between 1997 and 2017, provide a strong and robust justification to the role of export credit insurance and guarantees in promoting merchandise exports in the Arab region.

 
Author: Riadh Ben Jelili

 


WP/2018/01: Does Foreign Direct Investment Affect Growth in Developing Countries? A Semi-Parametric Analysis

 

Abstract: It is often asserted with confidence that foreign direct investment (FDI) is beneficial for economic growth especially in the host developing economy. Nevertheless, there is no empirical consensus on a positive effect of FDI on host-country growth, nor on the direction of causation. One of the reasons behind the lack of consensus is likely the presence of nonlinearities in FDI and growth relationship. Most of the previous studies either used the linear empirical growth model or tried to bypass the nonlinearity issue by using ad hoc procedures. However, it is also true that growth theory provides little guidance about the exact nature of nonlinearity. Consequently, it is almost impossible to determine the exact form of nonlinear specification that would be appropriate for all data sets and data ranges. Our paper investigates this challenging question in empirical growth literature that is the impact of FDI in promoting economic growth in developing economies without adopting any ad hoc procedure to capture the nonlinearity in FDI-growth relationship. Based on a dualistic growth framework originally developed by Feder (1982) and partial linear regression approach, we are able to separate measure for sector externality and factor productivity effects between the two sectors (exports and non-exports sector). We define sectoral externality, as a function of FDI stocks per capita. Thereby, our theoretical framework allows us to capture both direct and as well as indirect effects of FDI on economic growth across 58 developing countries during the period 1990-2011. We contribute to the existing literature in two ways. Firstly, the linearity constraint in investigating the role of FDI on economic growth is released by using a nonlinear econometric model. Secondly, the adoption of the dualistic growth model framework allows identifying the spillover effects of FDI.
 
Author: Riadh Ben Jelili