Abstract
This paper investigates the effect of Foreign Direct Investment (FDI) on economic growth in Greece, within a framework that also accounts unemployment rate, using annual data covering the period 1970 to 2017. Several econometric models are applied including the ARDL bound test approach for cointegration as well as ECM-ARDL model for causality. The results of the study confirm the existence of a long run relationship among the examined variables. The Granger causality results indicated a strong unidirectional causality between economic development and foreign direct investments with direction from economic development to foreign direct investments. Finally, the variance decomposition method and the impulse response functions are used to test the strength of causality between the variables. The results of the study offer new perspectives and insight for new policies for sustainable economic development, increasing investments and reducing unemployment.
Highlights
In recent years, there is a growing interest in the relationship between foreign direct investments, unemployment and economic growth
There are several discussions about how foreign direct investments may be a possible solution in unemployment reduction and economic growth
The purpose of this paper is to examine the links between Foreign Direct Investment (FDI), unemployment and economic growth in Greece over the period 1970-2017
Summary
There is a growing interest in the relationship between foreign direct investments, unemployment and economic growth. The economic crisis which started in 2008 has created serious concerns about high unemployment rates and negative growth. Despite the continued recovery in most European countries, there are still countries that are facing serious problems due to high unemployment rates. In 2012, unemployment in European Union reached 26 million people (AMECO, 2014). There are several discussions about how foreign direct investments may be a possible solution in unemployment reduction and economic growth. Many economists believe that FDI enhances private investments, encourages the creation of new jobs, transfers knowledge and technological skills in the www.scholink.org/ojs/index.php/ijafs
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