Impact of Foreign Direct Investment on Economic Growth — Case Study of the SEE Countries

Abstract

The main focus of this study is on foreign direct investment (FDI), which (through its direct and indirect contributions) can serve as the main driver of economic development for countries in general. The study examines countries in Southeastern Europe (SEE) -Kosovo, Albania, Montenegro, Serbia, Northern Macedonia and Bosnia and Herzegovina for the period 2005-2020 for the dependent variable, i.e., GDP, and for the independent variables: Goods and Services, Wages, Social Transfers, Subsidies, Investment Expenditures, and FDI. The techniques used to analyse the data include the descriptive method, the regression model, the DW test and (for multicollinearity between variables) the VIF test. In general, the study finds a positive and significant relationship between economic growth and FDI flows in some countries, but not in Kosovo and Bosnia and Herzegovina. Based on the results studied, more appropriate FDI policies are suggested. It is suggested that policy makers in these countries not only respond to protect the deterioration of GDP, but also support the infrastructure for doing business.