Relationship between FDI and Capital Flight

In this research, the relationship between foreign direct investment (FDI) and capital flight in nine MENA countries was studied using panel data during the 1991-2006 Period. For this purpose, at first, capital flight was estimated by two conventional i.e. Erbe and the World Bank and Morgan. The results of cointegration test show that, regardless of the methods of capital flight estimation there exists a long-run equilibrium between the above mentioned variables. Further more, the results reveal that there exists a significant and positive relationship between capital flights and FDI inflows for the period under consideration for MENA countries. Moreover, the above mentioned results are confirmed by applying both methods of capital flight estimations.