IMPACT OF FOREIGN DIRECT INVESTMENT ON THE ECONOMIC GROWTH: THE CASE OF COMMONWEALTH OF INDEPENDENT STATES

Abstract

Economic theory suggests that free capitalflows increase the efficiency of the resource allocation, andstimulate economic growth. Foreign direct investment (FDI)is seen as a kind of cure for all economic problems incountries that do not have a sufficient level of accumulationfor starting economic growth. In this paper we willinvestigate the impact of FDI on economic growth inCommonwealth of Independent States (Armenia, Azerbaijan,Belarus, Kazakhstan, Kyrgyzstan, Moldova, RussianFederation, Tajikistan and Ukraine) for the 2000-2015period. Our assumption is that increase in FDI inflow willhave positive impact on economic growth. The analyisis wascarried out using the ARDL (Pooled Mean Group/ARDistributed Lag Models). This model is particularlyconvenient in a situation where all variables are stationaryat different levels. The results shows strong and positiveimpact of FDI on economic growth.