The impact of international capital flows on economic development in Tunisia: An Econometric Study during the Period of 1980-2013

Abstract

This study aims at identifying to what extent the international capital flows have contributed in the financing of the Tunisian economy. In order to achieve this goal, the least squares method is used to construct multiple regression models and to test the impact of flows of the three forms namely foreign investments, external debt, and official development aid, as well as an assistant variable representing the local capital, on a set of economic indicators that measure the level of economic development.

The study results reveal that the contribution of international capital flows in the interpretation of changes in development indicators in Tunisia differ from a model to another, while they contribute to the interpretation of a considerable part of changes in each of the average GDP per capita growth rate, production structure, savings gap and labor. It also indicates the lack of significant statistical relationship between international capital flows and the foreign trade gap. Therefore, the study recommends more efforts to provide a transparent, stable, and predictable investment environment, as well as the appropriate mechanism for the flow of foreign capital into productive investments, support macroeconomic stability, and correct the failure in the market, allowing local and international businesses to operate efficiently and consequently, positively impact development.