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Impact of foreign direct investment (FDI) on domestic investment in Republic of Croatia

Author

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  • Ivanović, Igor

Abstract

The aim of this paper is to investigate how foreign direct investment (FDI) affects domestic investment in the Republic of Croatia. More precisely, the general purpose of this study is to determine the impact of net inflow of foreign capital on domestic investment in order to gain a clearer picture about the sensitivity and efficiency of domestic investment. After parsing domestic investment and FDI in Croatia, according to Croatian Bureau of Statistics and the Croatian National Bank, a historical overview of their movement from 1995 to 2014 was analyzed. In the following an overview and comparison of studies from around the world which deal with similar topic was made. In the empirical part; domestic gross fixed capital formation, changes in domestic stocks, net FDI and GDP growth rate was used as variables. Quarterly time series data ranging from the Q1 2001 to Q4 2014 were processed with the subset VAR (vector autoregressive) econometric model. The results shows that FDI have negative influence on domestic investment in the Republic of Croatia with time lag.

Suggested Citation

  • Ivanović, Igor, 2015. "Impact of foreign direct investment (FDI) on domestic investment in Republic of Croatia," MPRA Paper 70076, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70076
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    File URL: https://mpra.ub.uni-muenchen.de/70076/1/MPRA_paper_70076.pdf
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    References listed on IDEAS

    as
    1. Jonathan Munemo, 2014. "Business start-up regulations and the complementarity between foreign and domestic investment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 745-761, November.
    2. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
    3. SAGLAM, B. Bayraktar & Yalta, A.Y, 2011. "Dynamic Linkages Among Foreign Direct Investment, Public Investment And Private Investment: Evidence From Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    4. Mileva, Elitza, 2008. "The impact of capital flows on domestic investment in transition economies," Working Paper Series 871, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    foreign direct investment; gross investment; crowding out/in effect; subset VAR; investment efficiency;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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