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Foreign Direct Investment and Macroeconomic Stability in Resource- Dependent Emerging Economies
(Saudi Digital Library, 2025) Alotaibi, Abdullah; Ozkan, Gulcin
This dissertation investigates the impact of foreign direct investment (FDI) on long-term growth and macroeconomic stability in 24 natural-resource-dependent emerging economies from 1996 to 2023. Using fixed-effects and dynamic GMM estimators, the analysis shows that FDI’s growth effects are not immediate but materialise with a one-year lag, reflecting the time required for cap- ital absorption and technology diffusion. A major contribution of this study is the examination of the interaction between FDI and natural resource rents. Results reveal that this interaction ef- fect strengthens as resource dependence increases, indicating that resource abundance amplifies the productivity of foreign capital. Economically, this suggests that in highly resource-dependent economies, FDI complements resource revenues by financing diversification, enhancing absorp- tive capacity, and supporting long-run growth. Moreover, the results show that strong government effectiveness further magnifies these gains and conditions the stability outcomes. These findings offer policy-relevant insights into leveraging FDI for sustainable growth in resource-rich emerging markets.
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