VAR analysis on Foreign Direct Investment in Romania

A research analysis of the impact of FDI on GDP, exports and imports in Romania, on the basis of econometric models, provides us with an opportunity to examine how they have established in the transition period a number of interdependencies, more or less intense, among the variables mentioned above. In a way, the analysis which we performed gives us an opportunity to see not only the rigid positions of explained and explanatory variables, but also a change in the causality among these, which can be identified, both by different sizes of elasticity coefficients and by applying Vector Autoregresive model (VAR). The purpose of such a quantitative analysis based on patterns of foreign direct investment, was to identify the two-way relationship, with different intensities from one period to another, of the FDI and their determinants as well as among the indicators of performance of the Romanian economy and foreign direct investment, as a major factor of influence. We apply the VAR technique to quantify the parameters of elasticity between FDI, as an explained and/or explanatory variable and other factors in the cause-effect relationship. The VAR analysis was based on data obtained from NOTR (National Office of Trade Registrar), NBR (National Bank of Romania) and NIS (National Institute of Statistics) for FDI, GDP indicators, export and import indicators for the period 1997-2011.