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Volume 70, Issue 6


The Heterogeneous Nature of FDI in Central and Eastern Europe. Impact of the Entry Mode on the Host Country’s Economic Growth

Humanicki, Marcin; Olszewski, Krzysztof

Year: 2020   Volume: 70   Issue: 6   Pages: 541-565

Abstract: Foreign direct investment (FDI) is considered to have a positive impact on economic growth in the host country. However, there is no consensus in the empirical literature on the growth effects of FDI. One reason may be that many studies are based on aggregated data on capital flows and do not take into account the different modes of entry of a foreign investor. The paper analyses the growth effects of FDI in Central and Eastern European (CEE) countries by distinguishing three entry modes of a foreign investor (greenfield, reinvestment, mergers and acquisitions). Firstly, it provides a literature review on the links between economic growth and FDI. Secondly, it describes the method used to construct data on greenfield FDI and reinvestments. Finally, it shows that in case of the CEE countries there is only an indirect growth effect of FDI (through the accumulation of capital), while for the non-CEE countries a direct positive effect of FDI can be found.

JEL classification: C23, F21, F30, F43

Keywords: foreign direct investment, economic growth, Central and Eastern Europe, panel data regressions

DOI: https://doi.org/10.32065/CJEF.2020.06.03

RePEc: https://ideas.repec.org/a/fau/fauart/v70y2020i6p541-565.html

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