FDI And Economic Growth. Evidence From Simultaneous Equation Models

by Ruxanda, Gheorghe and Muraru, Andreea
Published in Romanian Journal of Economic Forecasting
, 2010, volume 13 issue 1, 45-58

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This paper analyses whether foreign direct investments have an impact on the Romanian economic growth. By means of simultaneous equation methods we obtained evidence of the bi-directional connection between the two, meaning that incoming FDI stimulates economic growth and, in its turn, a higher GDP attracts FDI.
Two methods were used in performing the analysis, one considering the relation between the share of FDI in GDP and economic growth in a five-equation system and the second considering the levels of FDI and GDP, respectively, in a two-equation system.

Keywords: foreign direct investment, economic growth, simultaneous equation models
JEL Classification:
F21, F43