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The Role of Economic Freedom in the Relationship between Foreign Direct Investment and Economic Growth: Evidence from Former Socialist Countries

Author

Listed:
  • Shokhrukh, Ochilov

    (Institute of Macroeconomic and Regional Studies, Tashkent, Uzbekistan)

  • Ikboljon, Kasimov

    (Institute of Macroeconomic and Regional Studies, Tashkent, Uzbekistan)

  • Zamon, Xaldarov

    (Institute of Macroeconomic and Regional Studies, Tashkent, Uzbekistan)

Abstract

This study investigates the role of economic freedom in attracting foreign direct investment (FDI) and its impact on economic growth in 15 former socialist countries from 2000 to 2021 through the Generalized Method of Moments estimation method. Our findings suggest that higher economic freedom helps countries attract additional foreign investment. Furthermore, we found that a one-unit increase in the economic freedom index increases the real gross domestic product per capita by 0.019%. The findings also reveal that a 1% increase in FDI leads to a 0.585% surge in real income per capita, whereas trade openness surges income by 1.24%. These results reveal that FDI has a positive impact on economic growth, suggesting that FDI is an important factor driving economic development in former socialist countries. This study also provides policy recommendations based on the findings, highlighting the importance of promoting free and healthy competition, transparency, accountability, and investment in education and infrastructure.

Suggested Citation

  • Shokhrukh, Ochilov & Ikboljon, Kasimov & Zamon, Xaldarov, 2023. "The Role of Economic Freedom in the Relationship between Foreign Direct Investment and Economic Growth: Evidence from Former Socialist Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 38(2), pages 322-334.
    • Handle: RePEc:ris:integr:0877
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    More about this item

    Keywords

    economic freedom; foreign direct investment; economic growth; former socialist countries; GMM; panel data; economic growth;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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