Abstract

This paper investigates the moderating role of political stability in the Foreign Direct Investment (FDI) inflows into Yemen over the last two decades. Augmented Dickey Fuller (ADF) test was employed to check the stationary of the data. Following the ADF test, the standard and hierarchal regression approaches were used for the analysis. The standard regression results show that the GDP growth rate has significant negative effects on FDI inflows into Yemen while exchange rate, inflation rate, balance of payment, and gross national income have no effect on the FDI inflow in the country. However, when the moderating variable, political stability is used together with other variables such as exchange rate, inflation rate, balance of payment and gross national income, the results of hierarchical regression indicate that these variables are important determinants of FDI inflows into the country. Therefore, the results suggest that political stability is critical for the future growth of Yemen economy.

This work is licensed under a Creative Commons Attribution 4.0 License.