The Migrating Nature Of Foreign Direct Investments And Their Impact On Economic Growth

The global economic crisis of 2008-2009 has reignited the debate concerning the pertinence of financial integration, both in industrially advanced and emergent economies as well. Thus, the crisis provides a new chance to revise the analysis comparing the international capital flows and economic growth. The foreign direct investments of the past few years have become increasingly important for the global economic activity, and the professional literature has developed a numerous number of hypotheses concerning the relationship between FDI and economic growth. The idea that the increased FDI inflows result in stronger economic growth is currently very topical in several debates. Some of the previously conducted research argue that FDIs can have both positive and negative effects on the GDP. The careful analysis of the effects that FDIs may have on economic growth in various economic sectors of the recipient country has resulted in various findings. FDIs can have negative effects on the economic growth prospects of the recipient countries when they lead to substantial reversed flows in the form of revenues from dividends or when multinationals obtain substantial privileges or other advantages in the recipient country. There are numerous research papers in professional literature that approach the relationship between foreign direct investments and economic growth. The research in the field has intensified in the past decade, due to the increasingly important weight of FDI in the total capital flows. The present research will analyse the relation between economic growth and the amount of international capital flows in order to identify to what extend foreign direct investments help increase the level of economic growth. The analysis we are suggesting encompasses the group of developed countries, developing countries, as well as those countries identified as transitioning during 1970-2013. The main objective of the present research is to identify and analyse systematic models in the relationship between FDIs and economic growth throughout a period that can be best described as accommodating a high level of financial integration.