The Interrelationship of FDI and GDP in European Transition Countries

Kresimir Cicak and Petar Sorić

International Journal of Management Science and Business Administration, 2015, vol. 1, issue 4, 41-58

Abstract: Theory states that the foreign direct investments (FDI) have multiple positive effects on a country’s economy. Evidence can be sought from Central and Eastern European countries where FDI is seen as one of the main contributors to GDP growth. This paper examines the relationship between FDI and GDP growth rate in Croatia and other chosen European transition countries using bivariate VAR models. Based on the research conducted, it was found that FDI Granger causes GDP growth in most countries. This is especially true in Poland, Czech Republic and Hungary which have attracted a significant amount of FDI starting from 1990. The estimated VAR models for Latvia and Slovenia provide evidence that GDP causes FDI, corroborating the theory that investor are prone to stable macroeconomic conditions. This paper tries to make a comparative analysis of FDI-GDP link in New EU member states. Further research should certainly include other aspects such as the quality of the legislative system, labor productivity and labor costs, access to capital markets, etc

Keywords: FDI; GDP Growth; Granger Causality; VAR (search for similar items in EconPapers)
JEL-codes: M00 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:mgs:ijmsba:v:1:y:2015:i:4:p:41-58

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