FOREIGN DIRECT INVESTMENTS AS A SOURCE OF SOUTHEAST EUROPEAN ECONOMIC DEVELOPMENT FINANCING
Keywords:
economic development, sources of financing, foreign direct investment, domestic savings, Southeast Europe
Abstract
The paper analyzes the sources of Southeast European countries economic development financing – Albania, Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Romania, Macedonia, and Serbia from 2009 to 2018. The research focus is on the one hand directed towards the analysis of the economic growth rate, the share of domestic savings and the current account balance. On the other hand, particular emphasis in the analysis is given to the data on the dynamics of foreign direct investment. The analysis in the paper indicates that due to the lack of domestic savings and difficulties with foreign borrowing, in the observed period, foreign direct investment was the most represented source of financing for economic development. The analysis for the SEE countries also shows that the lack of domestic savings caused the unfavorable structure of foreign direct investment flows with the end result of a low economic growth rate. When it comes to the relevance of foreign direct investment for the long-term economic development of Southeast European countries, it concludes that a more active development policy is needed, aimed at increasing the share of domestic savings in gross domestic product as well as the growth of the domestic investment. Simply, in these circumstances, it is unrealistic to expect it to be just foreign investment.
Key words: economic development, sources of financing, foreign direct investment, domestic savings, Southeast Europe
References
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Andrei, E.A., Petrescu-Huidumac, E.C. (2013). Saving and economic growth: An empirical analysis for Euro area countries. Theoretical and Applied Economics, 20(7), 43-58.
Anoruo, E., Ahmad, Y. (2001). Causal relationship between domestic savings and economic growth: Evidence from seven African countries. African Development Review, 13(2), 238–249.
Adžić, S.J., Tošković D.J. (2015). Analiza trenda kretanja priliva stranih direktnih investicija u tranzicionim ekonomijama Zapadnog Balkana. Poslovna Ekonomija, IX(II), 235-258.
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Nistor, P. (2014). FDI and economic growth, the case of Romania. Procedia Economics and Finance, 15, 577-582.
Odhiambo, N.M. (2009). Savings and economic growth in South Africa: A multivariate causality test. Journal of Policy Modeling, 31, 708-718.
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Roman, D.M., Padureanu, A. (2012). Models of foreign direct investments influence on economic growth: Evidence from Romania. International Journal of Trade, Economics and Finance, 3, 25-29.
Saglam, Y. (2017). FDI and Economic Growth in European Transition Economies: Panel Data Analysis. Journal of Yasar University, 12(46), 123-135.
Shahbaz, M., Rahman, M.M. (2010). Foreign capital inflows-growth nexus and role of domestic financial sector: An ARDL co-integration approach for Pakistan. Journal of Economic Research, 15, 207–31.
Stojanovic, D., Ilic, B., Mihajlovic, D. (2017). Strane direktne investicije u ostvarivanju ciljeva održivog razvoja lokalnih zajednica u Srbiji. Ecologica, 86, 265- 271.
Stojanović, D. (2018). Strane direktne investicije, izvoz i ekonomski rast u Srbiji. Poslovna ekonomija, XII, (1), 54–72.
Tahir, M.D., Ögüt, A., Mucuk, M. (2014). The Effect of Foreign Direct Investment on Economic Growth: The Case of Turkey. Paper presented at International Academic Conferences, Prague, Czech Republic.
Tang, C.F., Ch’ng, S.K. (2012). A multivariate analysis of the nexus between savings and economic growth in the ASEAN-5 Economies. Margin-The Journal of Applied Economic Research, 6(3), 385-406.
Tang, C.F., Chua, Y.S. (2012). The savings growth Nexus for the Malaysian economy: A view through rolling sub-samples. Applied Economics, 44, 4173-4185.
Tang, C.F., Lean, H.H. (2013). The role of savings on economic growth in Malaysia: A view from generalized variance decomposition analysis. Economic Computation and Economic Cybernetics Studies and Research, 47(3), 199-214.
Tang, C.F., Tan, W.B. (2014). A revalidation of the savings–growth Nexus in Pakistan. Economic Modelling, 36, 370–377.
Verma, R. (2007). Savings, investment and growth in India. South Asia Economic Journal, 8(1), 87-98.
World Bank, (2018). World Development Indicators (WDI). Internet http://databank.worl dbank.org/data/reports.aspx?source=world-development- indicators [Preuzeto 05.03.2020.]
Aghion, P., Howitt, P. (2009). The Economics of Growth. MIT Press.
Alfaro, L., Kalemli-Ozcan, S., Volosovych, V. (2008). Why doesn't capital flow from rich to poor countries? An empirical investigation. The Review of Economics and Statistics, 90(2), pp 347-368.
Agrawal, P., Sahoo, P., Radjan, D.K. (2010). Savings behavior in India: Co- integration and causality evidence. Singapore Economic Review, 55(2), 273-295.
Andrei, E.A., Petrescu-Huidumac, E.C. (2013). Saving and economic growth: An empirical analysis for Euro area countries. Theoretical and Applied Economics, 20(7), 43-58.
Anoruo, E., Ahmad, Y. (2001). Causal relationship between domestic savings and economic growth: Evidence from seven African countries. African Development Review, 13(2), 238–249.
Adžić, S.J., Tošković D.J. (2015). Analiza trenda kretanja priliva stranih direktnih investicija u tranzicionim ekonomijama Zapadnog Balkana. Poslovna Ekonomija, IX(II), 235-258.
Baharumshahl, A.Z., Thanoon, A.M., Rashid,S. (2003). Savings dynamic in Asian countries. Journal of Asian Economics, 13, 827-845.
Basu, P., Chakraborty, C., Reagle, D. (2003). Liberalization, FDI, and Growth in Developing Countries: A Panel Cointegration Approach. Economic Inquiry, 41, 510- 516.
Budha, B. (2012). A multivariate analysis of savings, investment and growth in Nepal. Internet http://mpra.ub.uni-muenchen.de/id/eprint/43346 [Preuzeto 15.03.2020].
Carkovic, M., Levine, R. (2005). Does foreign direct investment accelerate economic growth? In Does foreign direct investment promote development? ed. Moran, H.T., Graham, M.E., Blomström, M., 195–220. Washington, DC: Institute for International Economics.
Chanda, A.L.A., Ozcan, K.S., Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64, 89–112.
Chowdhury, A., Mavrotas, G. (2006). FDI and growth: What causes what?. The World Economy, 29(1), 9-19.
Cvetanović, S., Despotović, D. (2014). Izvori finansiranja razvoja zemalja Zapadnog Balkana u periodu 2001-2012. godine. Ekonomika, 60(3), 59-66.
Cvetanović, S., Mladenović, I. (2014). Ekonomija kapitala i finaniranje razvoja. Niš: Sopstveno izdanje
Ćorović, E. (2019). Strukturni problemi finansiranja privrednog rasta Republike Srbije. Naučne Publikacije Državnog Univerziteta u Novom Pazaru Serija B: Društvene & humanistiĉke nauke, 2(1), 28-45.
Greenidge, K., Miller, C. (2010). Causal chains between savings investment and growth: Evidence for Latin America and the Caribbean. Business, Finance & Economics in Emerging Economies, 5(2), 121-170.
Gulmez, A., Yardımcıoglu, F. (2013). BRICS ülkeleri ile Türkiye’nin ekonomik büyümesinde ulusal ve yabancı tasarrufların etkisi: Panel veri analizi. C.Ü. İktisadi ve İdari Bilimler Dergisi, 14(1, 47-68.
Hong, D:V., A Vo, The A., Zhang, Z. (2019a). Exchange Rate Volatility and Disaggregated Manufacturing Exports: Evidence from an Emerging Country. Journal of Risk and Financial Management, 12, 12.
E. (2018). Privredni rast i institucionalna tranzicija Republike Srbije. Ekonomski horizonti, 20(2), 95-108.
Jangili, R. (2011). Causal relationship between saving, investment and economic growth for India – What does the relation imply? Reserve Bank of India Occasional Papers, 32(1), 25-39.
Kolasa, A., Liberda, B. (2014). Determinants of saving in Poland: Are they different than in other OECD countries?. Working Papers No. 13/2014 (130), University of Warsaw.
Konings, J. (2001). The effects of foreign direct investment on domestic firms. Economics of Transportation, 9, 619-33.
Koojaroenprasit, S. (2012). The impact of foreign direct investment on economic growth: A case study of South Korea. International Journal of Business and Social Science, 3, 8-19.
Kovačević, R. (2004). Uticaj stranih direktnih investicija na privredni rast iskustva zemalja Evropske Unije. Biblid, LVI(4), 409-446.
Magnus, B., Kokko, A. (2002). The Economics of International Investment Incentives. Internet https://www.oecd.org/daf/inv/investment-policy/2487874.pdf [Preuzeto 15.03. 2020.].
Massa, I. (2011). Impact of Multilateral Devlopment Financial Institutions on Economic Growth. Overseas Development Institute, 1-23.
Ministarstvo finansija Republike Srbije, (2019).), Tekuća makroekonomska kretanja, Realni sektor https://www.mfin.gov.rs/
Moura, R., Forte, R. (2010). The effects of foreign direct investment on the host country economic growth-theory and empirical evidence. FEP Working Papers No. 390, Universidade do Porto, Faculdade de Economia do Porto.
Nguyen, Ha M., Bui, H.N., Vo. H.D. (2019). The Nexus between Economic Integration and Growth: Application to Vietnam. Annals of Financial Economics, 14, 1950041.
Nistor, P. (2014). FDI and economic growth, the case of Romania. Procedia Economics and Finance, 15, 577-582.
Odhiambo, N.M. (2009). Savings and economic growth in South Africa: A multivariate causality test. Journal of Policy Modeling, 31, 708-718.
Omowunmi, F.O. (2014). Foreign direct investment and economic growth: A case of Nigeria. Bharati J. Manag. Res, 4, 1–20.
Patra, S. K., Murthy, D. S., Kuruva, M. B., Mohanty, A. (2017). Revisiting the causal nexus between savings and economic growth in India: An empirical analysis. Economia, 18(3), 380-391.
Pješčića, V. (2010). Značaj domaće štednje za novi model privrednog rasta u Srbiji. https://www.nbs.rs/internet/latinica/15/mediji/govori/VP-G-20101029.html), [Preuzeto 15.04. 2020.].
Popović, G., Savić, M. (2016). Uticaj stranih direktnih investicija na ekonomski rast u Evropskoj Uniji. Međunarodna Ekonomija, Internet http://oikosinstitut.org/wp- content/uploads/2016/11/popovic.pdf [Preuzeto 15.03.2020.].
Raheem, I.D., Ogebe, J.O. (2014). External financial flows, policies and growth in Sub-Saharan Africa. Journal of Global and Scientific Issues, 2(4), 21-32.
Roman, D.M., Padureanu, A. (2012). Models of foreign direct investments influence on economic growth: Evidence from Romania. International Journal of Trade, Economics and Finance, 3, 25-29.
Saglam, Y. (2017). FDI and Economic Growth in European Transition Economies: Panel Data Analysis. Journal of Yasar University, 12(46), 123-135.
Shahbaz, M., Rahman, M.M. (2010). Foreign capital inflows-growth nexus and role of domestic financial sector: An ARDL co-integration approach for Pakistan. Journal of Economic Research, 15, 207–31.
Stojanovic, D., Ilic, B., Mihajlovic, D. (2017). Strane direktne investicije u ostvarivanju ciljeva održivog razvoja lokalnih zajednica u Srbiji. Ecologica, 86, 265- 271.
Stojanović, D. (2018). Strane direktne investicije, izvoz i ekonomski rast u Srbiji. Poslovna ekonomija, XII, (1), 54–72.
Tahir, M.D., Ögüt, A., Mucuk, M. (2014). The Effect of Foreign Direct Investment on Economic Growth: The Case of Turkey. Paper presented at International Academic Conferences, Prague, Czech Republic.
Tang, C.F., Ch’ng, S.K. (2012). A multivariate analysis of the nexus between savings and economic growth in the ASEAN-5 Economies. Margin-The Journal of Applied Economic Research, 6(3), 385-406.
Tang, C.F., Chua, Y.S. (2012). The savings growth Nexus for the Malaysian economy: A view through rolling sub-samples. Applied Economics, 44, 4173-4185.
Tang, C.F., Lean, H.H. (2013). The role of savings on economic growth in Malaysia: A view from generalized variance decomposition analysis. Economic Computation and Economic Cybernetics Studies and Research, 47(3), 199-214.
Tang, C.F., Tan, W.B. (2014). A revalidation of the savings–growth Nexus in Pakistan. Economic Modelling, 36, 370–377.
Verma, R. (2007). Savings, investment and growth in India. South Asia Economic Journal, 8(1), 87-98.
World Bank, (2018). World Development Indicators (WDI). Internet http://databank.worl dbank.org/data/reports.aspx?source=world-development- indicators [Preuzeto 05.03.2020.]