Foreign Direct Investment and Growth : EU, EMU and Transition Economies

Abstract

This paper empirically examines the relationship between Foreign Direct Investment (FDI) and economic growth conducting a panel data analysis for a period of 20 years (1989~2008) in three different country groups: European Union member-countries, European Monetary Union member-countries, and countries in transition. These three country groups differ in many dimensions, one of which is their degree of economic integration. In contrast to the theoretical work that tends to suggest that FDI inflows have a positive effect on economic growth, we do not find a robust causality relationship between FDI and economic growth.