Title

Foreign Direct Investment Inflows, Economic Growth, and Trade Balances: The Experience of the New Members of the European Union

Document Type

Article

Publication Title

Journal of East-West Business

Publication Date

1-1-2010

Abstract

The study examines the role of foreign direct investment (FDI) on economic growth and trade balances of 10 emerging economies in Europe before they joined the European Union. This article uses the Granger causality test to investigate the link between FDI inflows and economic growth for the countries under study. The findings show that gross domestic product growth has a unilateral Granger-cause on FDI inflows for 9 of 10 emerging European economies. However, the results did not show FDI inflows Granger-causing the changes in economic growth of any of the 10 countries. Furthermore, FDI inflows had no or negative effects on trade balances of the majority of the emerging European nations. The policy implications of this study are that host governments in emerging economies must carefully evaluate spillover effects of FDI inflows on their economies before offering significant incentive packages to lure multinational enterprises into their countries. © Taylor & Francis Group, LLC.

Volume

16

Issue

1

First Page

4

Last Page

23

DOI

10.1080/10669860903558102

ISSN

10669868

E-ISSN

15286959

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