Models of Foreign Direct Investments Influence on Economic Growth: Evidence from Romania
Mihai Daniel Roman
Bucharest Academy of Economic Studies; Advanced Research Center for Microeconomic and Macroeconomic Cybernetics (CIBEREC)
Bucharest Academy of Economic Studies
January 5, 2012
International Journal of Trade, Economics and Finance, Vol. 3, No. 1, pp. 25-29, February 2012
Last decades developing and emerging countries’ priorities shifted towards international capital flows, as a complementary way to finance domestic economic growth. But also last years capital flows and their components are affected by domestic and global crisis that frequently destabilize both developed and developing economies. Central and Eastern Europe countries are looking for foreign direct investments as a critical component to solving capital deficit problem. But the causality relation between foreign direct investments and growth is not necessary unidirectional: several theoretical works argued that foreign direct investments is a direct result of growth but other studies show that foreign direct investments generate economic growth.
In our paper we propose to model the relationship between foreign direct investment and economic growth in transition countries, especially in Romania. We use a neoclassical model with Cobb-Douglas production functions to analyze the effects of FDI on Romanian growth, followed by a short term GDP prognosis. Our basic results show that Romanian economic growth was positively influenced by fiscal policy, FDI and also by adhesion to EU.
Number of Pages in PDF File: 5
Keywords: foreign direct investments, economic growth, macroeconometrical model, prognosis
JEL Classification: F21, F43, C51, E17Accepted Paper Series
Date posted: March 12, 2012
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