IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0105.html
   My bibliography  Save this article

Foreign Direct Investment and Economic Growth in Transition Economies: A Panel Data Study

Author

Listed:

Abstract

Noting the paucity of studies that relate foreign direct investment (FDI) with economic growth in transition economies, this paper uses panel data for 12 CEE countries covering the period 1991-2002 and estimates a fairly standard growth framework with several different procedures. Seven main points are noted. First, our flexible models reveal a dramatic cross-country heterogeneity in parameters for both FDI and domestic investment. Second, the observed heterogeneity makes it hazardous to articulate a general substantive statement about the role of FDI (or domestic capital) in growth. Third, if a general statement were based on the averages for individual-country estimates, one might say that both FDI and domestic capital contribute substantially to growth in these economies and the role of FDI appears stronger. Fourth, estimates from identical-parameter models show huge differences even from individualcountry averages, particularly for domestic investment. Fifth, a reasonable test indicates absence of any major specification error (or “feedback”) as well as heteroscedasticity. Sixth, fixed-effects and random-effects models, that permit limited parametric variability, yield fairly similar patterns which, however, are different from both identical-parameter and flexible models. Seventh, it is pointed out that even when FDI is observed to have high returns and thus to make a substantial contribution to growth in such aggregate models, it should be recognized that direct returns on FDI generally belong to the foreign investors.

Suggested Citation

  • Iliuta, V. Cristina & Ram , Rati, 2005. "Foreign Direct Investment and Economic Growth in Transition Economies: A Panel Data Study," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 58(3), pages 337-352.
  • Handle: RePEc:ris:ecoint:0105
    as

    Download full text from publisher

    File URL: http://www.iei1946.it/RePEc/ccg/ILIUTA_RAM%20337_352.pdf
    File Function: Full text
    Download Restriction: no

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0105. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Procopio). General contact details of provider: http://edirc.repec.org/data/cacogit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.