Foreign Direct Investment and Growth Causality in the EU Countries and in the Transition Economies
This chapter investigates the impact of FDI on the GDP, in three groups of European countries; the European Union countries (EU-28), the Euro Area countries (EA-19), and the Eastern European Countries (EEC). An empirical model for this correlation was use
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Abstract This chapter investigates the impact of FDI on the GDP, in three groups of European countries; the European Union countries (EU-28), the Euro Area countries (EA-19), and the Eastern European Countries (EEC). An empirical model for this correlation was used to calculate the level of this correlation. The results reveal that FDI has a decisive impact on GDP, although it differs in each one of the previously mentioned groups of countries.
1 Introduction Foreign Direct Investment (FDI henceforth) contributes to national growth and improves the macroeconomic performance of host countries. Indeed, FDI increases exports and profits, especially in developing countries. Moreover, the allocation of domestic investment is improved along with the promotion of job creation, improvement of technology transfer, and enhancement of the overall growth (Dritsaki and Stiakakis 2014). FDI is considered important in highly developed countries and more so in developing ones. It is argued that FDI not only provides direct financial resources but also creates ideal conditions by transferring technology and knowledge from technologically developed countries to economically developing countries. This can be achieved by linking multinational suppliers to local and through increased competition. Through these channels, future FDI can boost changing economic output, open up the world economy, and lead to faster economic integration with developed countries.
N. Apostolopoulos Department of Economics and Business, Neapolis University Pafos, Paphos, Cyprus e-mail: [email protected] Z. Dermatis · P. Liargovas (*) Department of Economics, University of Peloponnese, Tripoli, Greece e-mail: [email protected]; [email protected] © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 C. Nikas (ed.), Economic Growth in the European Union, Contributions to Economics, https://doi.org/10.1007/978-3-030-48210-7_9
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Also, regional economic integration is considered as the driving force behind FDI in a country. The aim of this research is to evaluate the above relationships reflected in the positive relationship between FDI and economic growth, in terms of the increase of GDP. Furthermore, it aims to investigate the differences between the countries related to their level of development and economic integration. On the basis of the above, the degree of correlation of FDI to the rate of GDP change will be investigated. The data to be analyzed cover a long period of 30 years (1986–2016), from three different groups of countries: the European Union countries (EU-28), the Euro Area countries (EA-19), and the Eastern European countries (EEC). The three groups differ in the level of development and in the level of economic integration. Our main aim is to draw conclusions from the results of an analysis that can be used to develop economic policy approaches that improve the impact of FDI on GDP. The outcome of this research can act as a navigator of helping countri
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