Research On The Impact Of Foreign Direct Investment On Economic Growth In Algeria

Nowadays, the issue of Foreign Direct Investment (FDI) is being paid more attention, both at national and international level. Foreign direct investment is often seen as an important catalyst for economic growth in the developing countries. Consequently, in today's world, the international boundaries are not a barrier for investment and trade. Each state is dependent on the other for its development and growth. Foreign direct investment affects the economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfer in the host countries. The main purpose of the study is to investigate the impact of Foreign Direct Investment on economic growth in Algeria for the period 1991-2011.The relationship between Foreign Direct Investment and economic growth is analyzed by using the production function based on the endogenous growth theory. Other variables that affect economic growth such as export, domestic capital and human capital are also used. The results of the study show a statistically insignificant relation between the economic growth and Foreign Direct Investment Inflows in Algeria. The results also show that Foreign Direct Investment has a positive effect on Algeria's economic growth over the period of 1991-2000 and negative effect in the period 2001-2011..Policy recommendations are suggested based on the results obtained. So regarding the Foreign Direct Investment in Algeria it is recommended that the Government should expand its efforts to actively improve Algerian investment environment and openness. Algeria should pay attention to the quality of foreign enterprises investing in Algeria, determine the form of foreign direct investment flows and also strengthen guidance to conduct FDI inflows.