Abstract
This research paper will explain the impact and relationship between the Foreign Direct Investment (FDI) and economic growth, Kosovo case. The used data in research are secondary data and cover a period of time between 2008 and 2013. By using STATA program for calculation and by various regression analyses (descriptive statistics, linear regression and correlation) relationships have been identified between involved variables in research, where economic growth is defined as dependent variable, whereas FDI, interest rate and real effective and exchange rate (REER) are defined as independent variables. The main results in this research paper indicate that FDI has a positive relation (0.011) but non-significant effect (T<2) on economic growth while the interest rate has a positive relation (0.076) and a significant effect (T>2) on economic growth in Kosovo. The real effective exchange rate has a negative (-0.347) and non-significant relation (T<2) with economic growth. The main activities of FDI in overall Kosovo's economy are: real estate, transport and telecommunication, financial and manufacture services, construction, etc. The main conclusion is that the Kosovo institutions should create a favorable environment, such as: political stability, enforcement of justice, reduction of trade barriers, Kosovo should also create appropriate policy for protection of foreign investors, investment security, fair competition and institutional support. This will impact the drastic improvement and increase of FDI. In 2013 Kosovo had an FDI percentage of 5% of GDP while in 2007 it was over 13% of Kosovo's GDP.
Highlights
Over the last few decades, especially in countries that are in developing process, Foreign Direct Investment (FDI) has a special importance in the overall economy, by exerting a positive impact and having a multidimensional effect on many economic areas, such as: the development of the credit market, increasing export, improving competitiveness, transfer of technology and knowledge, social and human capital development, etc; (Badivuku and Berisha, 2008)
This part of research paper will present the results achieved through econometric STATA program, this constitutes the most important part of the research because here will be interpreted the implications of the parameters that are involved in research on different statistical and econometric methods
Iliria International Review – 2015/2 © Felix–Verlag, Holzkirchen, Germany and Iliria College, Pristina, Kosovo. This part of research paper will present the conclusion on the role of Foreign Direct Investment (FDI) in economic growth, Kosovo case
Summary
Over the last few decades, especially in countries that are in developing process, FDI has a special importance in the overall economy, by exerting a positive impact and having a multidimensional effect on many economic areas, such as: the development of the credit market, increasing export, improving competitiveness, transfer of technology and knowledge, social and human capital development, etc; (Badivuku and Berisha, 2008). The recent studies suggest that FDI has a beneficial impact on developing host countries (Loungani and Razin 2001). This comes as a result of the great need that these countries have for FDI and their attempt to use them efficiently in the most important strategic sectors of their economy. In order to attract FDI, SEE and Western Balkan countries shall undertake following measures: reduction of political risk and transaction costs, increase the knowledge and education in workforce, privatization process, fight the corruption, institutional support and promotion of FDI in the relevant countries (Hunya, 2000)
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