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How important are foreign and domestic investments, exports and human capital for Greece's economic growth?

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  • P Pegkas
  • C Tsamadias

Abstract

This study investigates empirically the causal relationship between economic growth and its determinants (foreign direct investment, domestic investment, exports, human capital) in Greece over the period 1970-2012. It uses time series analysis and estimates the effect of these determinants on economic growth, by applying a modification of Mankiw, Romer and Weil (1992) model. The empirical analysis reveals that there is evidence of unidirectional long-run and shortrun Granger causality running from foreign direct and domestic investments, exports and human capital to economic growth; and that there is a positive effect, in the long-run, of all determinants on economic growth. The contribution size of these economic variables, especially of foreign direct investment, is probably not adequate and sufficient to bring the Greek economy back to growth. Greece needs to implement many important structural reforms which will enhance the contribution of these determinants to economic growth.

Suggested Citation

  • P Pegkas & C Tsamadias, 2016. "How important are foreign and domestic investments, exports and human capital for Greece's economic growth?," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 23-45, March.
    • Handle: RePEc:eis:articl:116pegkas
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