Does outward foreign direct investment crowd in or crowd out domestic investment in central, east and southeast europe countries? an asymmetric approach

Safet Kurtović (), Nehat Maxhuni (), Blerim Halili () and Bujar Krasniqi ()
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Safet Kurtović: University of Travnik
Nehat Maxhuni: University Union Nikola Tesla
Blerim Halili: University Union Nikola Tesla
Bujar Krasniqi: KAF Institute for Accounting, Audit and Finance

Economic Change and Restructuring, 2022, vol. 55, issue 3, No 6, 1419-1444

Abstract: Abstract The previous empirical literature, relevant to Central, East and Southeast European (CESEE) countries, has mostly examined the effect of inward FDI but neglected the effect of outward foreign direct investment (OFDI) on domestic investment. Domestic companies and local foreign subsidiaries owned by multinational companies are the main sources of OFDI from the CESEE countries. The growth in the volume of OFDI from CESEE countries is a consequence of strengthening the competitiveness of companies. Despite this, these countries are still net recipients of FDI, because they get significantly higher FDI inflow than FDI outflow. We used the nonlinear autoregressive distributed lag (NARDL) model, a sample of 13 CESEE countries and the annual data for the period from 1995 to 2019 in this study. In the long run, we found there to be an asymmetric effect from OFDI on the domestic investments of Bulgaria, Estonia, Latvia, Poland, Russia, Slovenia and the Ukraine. We also found that OFDI has a crowding-out effect on the domestic investment of Bulgaria, Poland and the Slovenia, while it has a crowding-in effect on the domestic investment of Estonia, Latvia, Ukraine and the Russia.

Keywords: Asymmetry; Outward FDI; Domestic investment; Crowding-in effect; Crowding-out effect (search for similar items in EconPapers)
JEL-codes: C22 F21 F23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10644-021-09352-6

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