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The impact of foreign direct investment, bank credit and current account balance on economic growth on the basis of income level

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  • Alibey Kudar

    (Turkish Aerospace Industries, Inc.)

Abstract

According the literature, it appears that foreign direct investment (FDI), bank credit (CRDT) and current account balance (CAB) are key factors that determine economic growth as they influence funds needed in order for a country to keep its growth. In other words, FDI, CRDT and CAB set the ground for sustainable development. In this study covering 44 countries and the period of 1977-2017, the impact of FDI, CRDT and CAB on economic growth is investigated on the basis of income level. In this regard, 44 countries are divided into 4 groups: high income level (HIL), upper middle income level (UMIL), lower middle income level (LMIL) and low income level (LIL). In the study, the panel data approach is used. As per the results, FDI is a key factor for growth and especially, it is important for LMIL and LIL countries. As the income level increases, its positive effect on economic growth decreases. Current account deficit has a positive effect for UMIL countries, while it has a negative effect for HIL and LMIL countries. As for CRDT, it affects the growth of HIL countries only and its impact is negative.

Suggested Citation

  • Alibey Kudar, 2024. "The impact of foreign direct investment, bank credit and current account balance on economic growth on the basis of income level," Ekonomski pregled, Hrvatsko društvo ekonomista (Croatian Society of Economists), vol. 75(4), pages 311-329.
    • Handle: RePEc:hde:epregl:v:75:y:2024:i:4:p:311-329
    DOI: 10.32910/ep.75.4.2
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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