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Ponte Academic Journal
Jul 2018, Volume 74, Issue 7

THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE ECONOMIC GROWTH IN THE PERSPECTIVE OF FREE TRADE ZONE IN ALGERIA (1997-2016)

Author(s): zeeshan Ahmad ,Ali Bouchemal

J. Ponte - Jul 2018 - Volume 74 - Issue 7
doi: 10.21506/j.ponte.2018.7.5



Abstract:
The intent to conduct this study is to investigate the effect of the foreign direct investment on the economic growth of Algeria. Moreover, this study also analyzes the effect of imports and domestic capital on the economic growth after the establishment of a free trade zone in Algeria. In order to estimate the effect of FDI, exports and domestic capital, data from (1997-2016) was collected from various international organizations who provide statistical data. The Cobb-Douglas production function was used in this study to establish a link between foreign direct investment and economic growth. The results of this study show that foreign direct investment has a significant positive effect on the economic growth of Algeria after the establishment of free trade zone. Moreover, Algerian exports and domestic capital also have a significant positive association with the foreign direct investment. So, it is deduced that due to foreign direct investment in a country, its exports and economic growth also influence the economic growth of the country. In light of results, it is recommended that Algeria should provide tax incentives, political stability, secure, bribe-free and research-oriented environment so that, the more foreign direct investment could be attracted in free trade zone of Algeria and economic growth targets could be attained.
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