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Foreign Direct Investments and Economic Growth in Bulgaria: Theoretical Challenges and Empirical Results

Victor Yotzov

Economic Studies journal, 2020, issue 4, 3-27

Abstract: The assessment of the strength and direction of the link between foreign direct investments (FDIs) and economic growth has long been the focus of research activities, but empirical findings remain mixed. Most results, however, show that the overall effect of FDIs is positively related to growth and vice versa. At the same time, it is widely argued that the impact of FDIs is closely related to the so-called 'absorptive capacity' of the host economy, with the highest weight being the quantity and quality of the workforce; the degree of trade openness and economic freedom; the fiscal policy pursued and the degree of financial development. These are key factors for the effectiveness of foreign direct investment, which in turn further stimulate economic growth. The present study provides an overview of the basic theoretical concepts and empirical assessment of the impact of FDIs on the rate of economic growth in Bulgaria, taking into account other factors of growth as well. Quarterly data for the period 1990 Q1-2019 Q3 were used for this purpose. Relevant conclusions and recommendations are made regarding the economic policy pursued.

JEL-codes: F21 F23 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:bas:econst:y:2020:i:4:p:3-27