Impact of foreign direct investment on economic growth in central and eastern European countries

Abstract

The paper seeks to analyse foreign direct investment and its impact on economic growth in the Central and Eastern European countries between 2000 and 2012, with an emphasis on the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. The methodology applied in the first part involved comparative analysis of the trends in foreign investment and gross domestic product, and in the other, a growth model based on the Endogenous Growth Model. The analysis implied a great deal of spatial differentiation in the inflow of foreign investment and in economic growth. Estonia, followed by Hungary, the Czech Republic, and Slovakia by margin reports the highest volume of foreign direct investments for production of the gross domestic product and when recalculated to the manpower. Lower influence of the foreign direct investments on the economy was reported for Lithuania, Poland, Latvia, and Slovenia. In the second part, a growth model is compiled, which revealed that statistically significant relations exist between economic growth, FDI and investment growth. Growth of foreign direct investment positively demonstrates itself in increasing the level of the gross domestic product. The influence of foreign direct investment on economic growth of the Central and Eastern European countries was more visible in the period of 2009–2012.