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Determinants and growth effects of foreign direct investment

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  • Uppenberg, Kristian

    ()
    (European Investment Bank, Economic and Financial Studies)

  • Riess, Armin

    ()
    (European Investment Bank, Economic and Financial Studies)

Abstract

Focussing on Europe, this paper starts with reviewing the main determinants of foreign direct investment (FDI); a key observation is that economic policies and non-policy factors contribute equally to the direction of FDI flows. The paper then examines the growth-FDI nexus: while a strong positive correlation between inward FDI and economic growth exists, at least in the more advanced EU-15 economies it is not clear whether the causality runs from FDI to growth or vice versa; in the countries of Central and Eastern Europe (CEE) there is stronger evidence that FDI has boosted growth during the transition period, partly by augmenting domestic investment; that said, evidence of technology spillovers (a potentially important channel for FDI to boost growth) is harder to find in CEE than in developed economies. The paper finally argues that growth-enhancing policies in general are more promising than specific support for FDI.

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Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 3/2004.

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Length: 33 pages
Date of creation: 18 Jun 2004
Date of revision:
Handle: RePEc:ris:eibpap:2004_003

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Related research

Keywords: foreign direct investment; economic growth; innovation; mergers and acquisitions;

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References

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Citations

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Cited by:
  1. Nikolay Naydenov, 2008. "Opportunities for Foreign Direct Investments through International Business Incubators in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 180-211.
  2. Bilgehan Karabay & Gernot Pulverer & Ewa Weinmüller, 2009. "Foreign Ownership Restrictions: A Numerical Approach," Computational Economics, Society for Computational Economics, vol. 33(4), pages 361-388, May.
  3. Vittorio, Daniele & Ugo, Marani, 2008. "Organized Crime and Foreign Direct Investment: the Italian Case," MPRA Paper 7217, University Library of Munich, Germany.
  4. Daniele, Vittorio, 2007. "Criminalità e investimenti esteri. Un’analisi per le province italiane
    [The effect of organized crime on Foreign Investments. An Empirical Analysis for the Italian Provinces]
    ," MPRA Paper 6417, University Library of Munich, Germany.

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