The Incidence of Economic Freedom and Foreign Direct Investment in Economic Growth: Empirical Evidence from Tunisia

Abstract

Economic freedom is one of the most important factors in increasing economic growth. Thus, it affects the spillover effects of FDI through the improvement of the absorption capacity in the host countries. In this context, this thesis aims to study the macroeconomic impact of economic freedom on foreign direct investment inflows by basing empirical evidence for data from Tunisia over a period from 1980 to 2017. Using the famous economic method of generalized moments (GMM), the results of the estimates show that FDI positively affects economic growth and requires a high level of economic freedom, and makes it possible to increase the absorption capacity in host countries and '' attract more investors. Economic freedom increases FDI inflows to 0.098 units. More precisely, Tunisia also refers to the positive impact of economic freedom on FDI.