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A Quantitative Look at the Relationship between FDI Inflow and Economic Growth in North Macedonia, 2006-2018

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  • Bettina Jones

Abstract

Beginning in 2006, the North Macedonian government pursued a strategy for attracting foreign investment to the country to develop it economically. In theory, FDI inflow should have this effect in a developing country mainly by contributing to productivity spillovers to domestic firms and knowledge spillovers to the domestic labor force. The goal of the research was to determine what statistical association might exist between FDI inflow and economic growth in North Macedonia, to determine if the policy of FDI attraction was having one of its desired effects. The paper fleshes out the economic growth function Y=F(K, H, L, A); growth is a function of capital, human capital, labor, and technology to determine which variables to utilize. It was found that neither FDI inflow nor any of the other considered factors for economic growth had a significant association with growth. However, taken together, all these factors did a moderately good job of explaining the variation in economic growth over the considered period. Thus, arguments for FDI inflow's being a silver bullet for economic growth may be misplaced, as many other factors matter as well. This does not suggest that foreign direct investment ought not to be used as an economic development tool, however, as it may be having effects that are not captured by changes in economic growth.

Suggested Citation

  • Bettina Jones, 2020. "A Quantitative Look at the Relationship between FDI Inflow and Economic Growth in North Macedonia, 2006-2018," Business and Economic Research, Macrothink Institute, vol. 10(4), pages 1-12, December.
    • Handle: RePEc:mth:ber888:v:10:y:2020:i:4:p:1-12
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign direct investment; Economic growth; Development economics; Economic development; International business;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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