The impact of foreign direct investment, bank credit and current account balance on economic growth on the basis of income level

Alibey Kudar
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Alibey Kudar: Turkish Aerospace Industries, Inc.

Ekonomski pregled, 2024, vol. 75, issue 4, 311-329

Abstract: According the literature, it appears that foreign direct investment (FDI), bank credit (CRDT) and current account balance (CAB) are key factors that determine economic growth as they influence funds needed in order for a country to keep its growth. In other words, FDI, CRDT and CAB set the ground for sustainable development. In this study covering 44 countries and the period of 1977-2017, the impact of FDI, CRDT and CAB on economic growth is investigated on the basis of income level. In this regard, 44 countries are divided into 4 groups: high income level (HIL), upper middle income level (UMIL), lower middle income level (LMIL) and low income level (LIL). In the study, the panel data approach is used. As per the results, FDI is a key factor for growth and especially, it is important for LMIL and LIL countries. As the income level increases, its positive effect on economic growth decreases. Current account deficit has a positive effect for UMIL countries, while it has a negative effect for HIL and LMIL countries. As for CRDT, it affects the growth of HIL countries only and its impact is negative.

Keywords: Foreign direct investment; bank credit; current account balance; economic growth; panel data analysis; income level (search for similar items in EconPapers)
JEL-codes: C32 C33 F21 F32 F43 F47 (search for similar items in EconPapers)
Date: 2024
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