Determinants of Foreign Direct Investment in Saudi Arabia: An Empirical Analysis Using the QARDL Model for the period (1985-2024)
DOI:
https://doi.org/10.59992/IJFAES.2026.v5n10p2Keywords:
Foreign Direct Investment, Human Capital, Inflation, Oil Revenues, Per Capita Income, QARDL, Saudi ArabiaAbstract
This study aims to examine the impact of macroeconomic determinants on foreign direct investment (FDI) inflows in Saudi Arabia over the period 1985–2024, employing the Quantile Autoregressive Distributed Lag (QARDL) methodology developed by Cho et al. (2015) to capture nonlinear and asymmetric relationships across different quantiles of the FDI distribution. The study relies on annual data for five independent variables: trade openness, per capita income, human capital index, oil revenues, and inflation rate. The results reveal the existence of quantile cointegration among the variables and reject the symmetry hypothesis, confirming that the impact of macroeconomic determinants varies across different levels of FDI inflows (low, medium, and high).
Furthermore, the findings indicate significant positive effects of trade openness, per capita income, and human capital in both the short and long run across all quantiles, with human capital recording the largest positive impact. Oil revenues, by contrast, exhibit a significant negative effect consistent with the resource curse hypothesis. Inflation displays a negative relationship at higher investment levels, with a limited positive shift observed at lower investment levels. Asymmetric quantile causality tests further reveal significant causal relationships that vary according to the magnitude of the shock and the quantile level. These findings offer policymakers actionable insights to position Saudi Arabia as a competitive investment destination in the context of Vision 2030 targets. The study recommends accelerating the economic diversification agenda, enhancing human capital efficiency, and reducing excessive dependence on oil revenues.
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