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The Impact of Foreign Direct Investment on Exports: A Study of Selected Countries in the CESEE Region

Author

Listed:
  • Parveen Kumar

    (Department of Humanities and Social Science, National Institute of Technology Kurukshetra, Kurukshetra 136119, India)

  • Ali Moridian

    (Department of Economics and Management, Urimia University, Urmia 57179-44514, Iran)

  • Magdalena Radulescu

    (Department of Finance, Accounting and Economics, National University of Science and Technology Politehnica Bucharest, 060042 Bucharest, Romania
    BEU-Scientific Research Center, Baku Engineering University, Hasan Aliyev Str., 120, Khirdalan City AZ0101, Azerbaijan
    UNEC Research Methods Application Center, Azerbaijan State University of Economics (UNEC), Istiqlaliyyat Str. 6, Baku 1001, Azerbaijan
    Institute of Doctoral and Postdoctoral Studies, University Lucian Blaga of Sibiu, 550024 Sibiu, Romania)

  • Ilinca Margarita

    (Institute of Doctoral and Postdoctoral Studies, University Lucian Blaga of Sibiu, 550024 Sibiu, Romania)

Abstract

The evolving macroeconomic landscape, shaped by the global financial crisis and the COVID-19 pandemic, poses significant challenges for economies worldwide. However, Central, Eastern, and Southeastern European (CESEE) countries have demonstrated resilience and rapid recovery during crises, driven by a surge in consumption fueled by domestic credit and robust export growth supported by flexible exchange rates and adaptive monetary policies. Prior to EU accession, substantial foreign direct investment (FDI) during privatization and restructuring facilitated knowledge and technology transfers in CESEE economies. This study examines the interplay of exports, real exchange rates, GDP growth, FDI, inflation, domestic credit, and the human development index (HDI) in the CESEE region from 1995 to 2022, covering the transition period, EU accession, and major crises. Employing a panel ARDL model, we account for asymmetric effects of these variables on exports. The results reveal that GDP, FDI, inflation, domestic credit, and HDI significantly and positively influence exports, with HDI and GDP exerting the strongest effects, underscoring the pivotal roles of human capital and economic growth in enhancing export competitiveness. Conversely, real exchange rate depreciation negatively impacts exports, though non-price factors, such as product quality, mitigate this effect. These findings provide a robust basis for targeted policy measures to strengthen economic resilience and export performance in the CESEE region.

Suggested Citation

  • Parveen Kumar & Ali Moridian & Magdalena Radulescu & Ilinca Margarita, 2025. "The Impact of Foreign Direct Investment on Exports: A Study of Selected Countries in the CESEE Region," Economies, MDPI, vol. 13(6), pages 1-25, May.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:6:p:150-:d:1665161
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