Abstract

The paper studies correlation between FDI and GDP in EU15 member states, between 1980 and 2014. The FDI was set as an independent variable, and GDP as a dependent variable. The aim of paper is to study correlation between FDI and GDP in states that founded EU (then EEC) or joined EEC/EU up to 1996. The following research hypotheses were set: no. 1, stating that FDI and GDP in EU15 member states show a significant correlation, and research hypothesis no. 2, claiming that EU15 member states of the EU15 economic periphery show a higher correlation than EU15 member states of the EU15 economic core. The NULL hypothesis, which claims that FDI and GDP in EU15 member states do not show a significant correlation, was also set. The Pearson correlation coefficient values verified research hypotheses for most of studied states.

Highlights

  • The paper studies the correlation between foreign direct investment, net inflows (FDI) and gross-domestic product (GDP) in the 15 member states of the European Union between 1980 and 2014

  • We refer to the fact that in most cases these are post-communist states. All these states, including the two non-post-communist, joined the EU decades after most of the West European or South European EU member states, and they did not belong to the second European common market, the European Free Trade Association (EFTA) before joining the EU

  • The results show a significant correlation, according to the value of the Pearson correlation coefficient (R) between the FDI and the GDP, confirming research hypothesis no. 1 for most of the studied states

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Summary

Introduction

The paper studies the correlation between foreign direct investment, net inflows (FDI) and gross-domestic product (GDP) in the 15 member states of the European Union (the EU15) between 1980 and 2014. We refer to the fact that in most cases (except two: Cyprus and Malta) these are post-communist states. All these states, including the two non-post-communist, joined the EU decades after most of the West European or South European EU member states, and they did not belong to the second European common market (besides the EU), the European Free Trade Association (EFTA) before joining the EU. According to UNCTAD (2005), global FDI inflows increased from approximately U$55 billion in 1980 to around U$1400 billion in 2000. This unprecedented growth in FDI inflows has prompted academic economists and policy makers alike to devote much more effort to understanding the empirical relationships between GDP growth and FDI inflows in host countries [1]

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