Determinants of Foreign Direct Investment: Empirical Evidence from Saudi Arabia

The present study determines the factors affecting foreign direct investment using cross-sectional time-series data over 2000-2017 in the Saudi Arabian region. Moreover, it examines the long-run association of various independent variables with foreign direct investment. The study applies a three-tier process to empirically test the variables under consideration. First, it uses the augmented Dickey-Fuller test to check the stationarity of the trend analysis at the level and at first difference. Second, it uses White heteroscedasticity-consistent standard errors and covariance regression analysis. Finally, it applies Johansen’s co-integration analysis. The results indicate that all independent variables significantly affect foreign direct investment except infrastructure and market size at a 5% level of significance, and all the independent variables have a long-run association with foreign direct investment in Saudi Arabia