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Do Foreign Direct Investments Increase the Economic Growth of Southeastern European Transition Economies?

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  • Stanisic, Nenad

Abstract

There are two important effects of foreign direct investments (FDI) on a host economy: the effect on economic growth and the effect on export performances. Both economic features are important for the transition economies' prospects of European Union (EU) accession. After a short review of relevant research, this paper examines the statistical relationship between FDI inflow and economic growth. Results do not reveal any positive correlation between these two variables. Lack of correlation between FDI inflows and economic development is rather the consequence of methodological imperfections, than the real absence of positive influences of FDI. The problem arises from the fact that the observed countries are in the transition process. Due to structural reforms, there is production and employment decrease in inefficient domestic firms. This can neutralize or even outweigh the positive effect of FDI on economic growth of host sectors.

Suggested Citation

  • Stanisic, Nenad, 2008. "Do Foreign Direct Investments Increase the Economic Growth of Southeastern European Transition Economies?," MPRA Paper 8875, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:8875
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    Cited by:

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    2. Allen, Matthew M.C. & Allen, Maria L., 2015. "Companies’ Access to Finance, Co-operative Industrial Relations, and Economic Growth: A Comparative Analysis of the States of South Eastern Europe," Research in International Business and Finance, Elsevier, vol. 33(C), pages 167-177.
    3. Trang Thi-Huyen Dinh & Duc Hong Vo & Anh The Vo & Thang Cong Nguyen, 2019. "Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries," JRFM, MDPI, vol. 12(4), pages 1-11, November.
    4. Teixeira, Aurora A.C. & Fortuna, Natércia, 2010. "Human capital, R&D, trade, and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960-2001," Research Policy, Elsevier, vol. 39(3), pages 335-350, April.
    5. Jawaid, Syed Tehseen & Raza, Syed Ali, 2012. "Foreign Direct Investment, Growth and Convergence Hypothesis: A Cross Country Analysis," MPRA Paper 39000, University Library of Munich, Germany.
    6. Alexander Melnik & Irina Naoumova & Kirill Ermolaev & Jerome Katrichis, 2021. "Driving Innovation through Energy Efficiency: A Russian Regional Analysis," Sustainability, MDPI, vol. 13(9), pages 1-19, April.
    7. Hammed Oluwaseyi Musibau & Suraya Mahmood & Agboola Yusuf Hammed, 2017. "The Impact of Foreign Capital Inflows, Infrastructure and Role of Institutions on Economic Growth: An Error Correction Model," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(4), pages 35-49, December.
    8. James Temitope Dada & Ezekiel Olamide Abanikanda, 2022. "The moderating effect of institutions in foreign direct investment led growth hypothesis in Nigeria," Economic Change and Restructuring, Springer, vol. 55(2), pages 903-929, May.
    9. Faraji Kasidi & H. Chaturvedi & Rahul Singh, 2010. "Detecting Data Error and Inaccuracy," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(4), pages 405-425, November.

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    More about this item

    Keywords

    Foreign Direct Investments; Economic Growth; Transition Economies; Southeast Europe;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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