FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests
Foreign direct investments are seen as a prerequisite for gaining and maintaining competitiveness. The research objective of this study is to examine the relationship between foreign direct investment (FDI) and economic growth in “new” European Union member countries using various unit root, cointeg...
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| Format: | Article |
| Language: | English |
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Tomas Bata University in Zlín
2020-09-01
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| Series: | Journal of Competitiveness |
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| Online Access: | https://www.cjournal.cz/index.php?hid=clanek&bid=archiv&cid=374&cp= |
| _version_ | 1818363101607624704 |
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| author | Vlatka Bilas |
| author_facet | Vlatka Bilas |
| author_sort | Vlatka Bilas |
| collection | DOAJ |
| description | Foreign direct investments are seen as a prerequisite for gaining and maintaining competitiveness. The research objective of this study is to examine the relationship between foreign direct investment (FDI) and economic growth in “new” European Union member countries using various unit root, cointegration, as well as causality tests. The paper employs annual data for FDI and gross domestic product (GDP) from 2002 to 2018 for the 13 most recent members of European Union (EU13): Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. An estimated panel ARDL (PMG) model found evidence that there is a long-run equilibrium between the LogGDP, LogFDI and LogFDIP series, with the rate of adjustment back to equilibrium between 3.27% and 20.67%. In the case of the LogFDI series, long-run coefficients are highly statistically significant in all four models, varying between 0.0828 and 0.3019. These coefficients indicate that a 1% increase in LogFDI increases LogGDP between 0.0828% and 0.3019%. Results of a Dumitrescu-Hurlin panel causality test indicated that a relationship between the GDP growth rate and FDI growth rate is only indirect. Finally, only weak evidence was shown that FDI had a statistically significant impact on GDP in the EU13 countries over the period 2002-2018. This report of findings contributes to the literature concerning FDI and economic growth, namely regarding the current understanding of the relationship between these two factors. |
| first_indexed | 2024-12-13T21:43:07Z |
| format | Article |
| id | doaj.art-67a1d5d43e2e4568badd18b3d21d3e8a |
| institution | Directory Open Access Journal |
| issn | 1804-171X 1804-1728 |
| language | English |
| last_indexed | 2024-12-13T21:43:07Z |
| publishDate | 2020-09-01 |
| publisher | Tomas Bata University in Zlín |
| record_format | Article |
| series | Journal of Competitiveness |
| spelling | doaj.art-67a1d5d43e2e4568badd18b3d21d3e8a2022-12-21T23:30:30ZengTomas Bata University in ZlínJournal of Competitiveness1804-171X1804-17282020-09-01123476310.7441/joc.2020.03.03FDI and Economic Growth in EU13 Countries: Cointegration and Causality TestsVlatka Bilas0https://orcid.org/0000-0002-9021-6651University of Zagreb, Faculty of Economics and BusinessForeign direct investments are seen as a prerequisite for gaining and maintaining competitiveness. The research objective of this study is to examine the relationship between foreign direct investment (FDI) and economic growth in “new” European Union member countries using various unit root, cointegration, as well as causality tests. The paper employs annual data for FDI and gross domestic product (GDP) from 2002 to 2018 for the 13 most recent members of European Union (EU13): Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. An estimated panel ARDL (PMG) model found evidence that there is a long-run equilibrium between the LogGDP, LogFDI and LogFDIP series, with the rate of adjustment back to equilibrium between 3.27% and 20.67%. In the case of the LogFDI series, long-run coefficients are highly statistically significant in all four models, varying between 0.0828 and 0.3019. These coefficients indicate that a 1% increase in LogFDI increases LogGDP between 0.0828% and 0.3019%. Results of a Dumitrescu-Hurlin panel causality test indicated that a relationship between the GDP growth rate and FDI growth rate is only indirect. Finally, only weak evidence was shown that FDI had a statistically significant impact on GDP in the EU13 countries over the period 2002-2018. This report of findings contributes to the literature concerning FDI and economic growth, namely regarding the current understanding of the relationship between these two factors.https://www.cjournal.cz/index.php?hid=clanek&bid=archiv&cid=374&cp=fdicompetitivenesseconomic growthunit root testscointegration test (ardl)eu13granger causality |
| spellingShingle | Vlatka Bilas FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests Journal of Competitiveness fdi competitiveness economic growth unit root tests cointegration test (ardl) eu13 granger causality |
| title | FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests |
| title_full | FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests |
| title_fullStr | FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests |
| title_full_unstemmed | FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests |
| title_short | FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests |
| title_sort | fdi and economic growth in eu13 countries cointegration and causality tests |
| topic | fdi competitiveness economic growth unit root tests cointegration test (ardl) eu13 granger causality |
| url | https://www.cjournal.cz/index.php?hid=clanek&bid=archiv&cid=374&cp= |
| work_keys_str_mv | AT vlatkabilas fdiandeconomicgrowthineu13countriescointegrationandcausalitytests |