Foreign Direct Investment and Domestic Investment in the Host COUNTRY
The Case of Moroccan industry – Evidence from an ARDL Study
DOI:
https://doi.org/10.23882/emss26352Keywords:
FDI, economic growth, domestic capital, spillover, industryAbstract
This paper examines the relationship between Foreign Direct Investment (FDI) and domestic investment in the Moroccan industrial sector, with particular attention to domestic capital as a key spillover channel. Using an econometric ARDL (Autoregressive Distributed Lag) approach, the study analyzes both short-run and long-run dynamics among the variables within a hypothetico-deductive framework. The empirical results show that FDI does not have a significant impact on domestic investment in the short run, as domestic investment is mainly driven by its own lagged values, as well as by exports and human capital. In the long run, FDI also exhibits a negative and statistically insignificant effect on domestic investment, suggesting that foreign capital inflows do not translate into increased domestic investment in the Moroccan context. The study concludes that the benefits of FDI in terms of stimulating domestic investment are not automatic and may be constrained by structural factors such as sectoral concentration of foreign investment, limited technological spillovers, and weak integration of domestic firms into multinational value chains. Accordingly, policy efforts should focus on strengthening the absorptive capacity of the local economy, improving institutional coordination, and enhancing the integration of domestic firms into global production networks in order to better leverage FDI for sustainable industrial growth.
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