The relationship between foreign direct investment and economic growth: evidence from transition countries

Abstract

This paper examines the importance of foreign direct investment on economic growth. Using a panel data set for 27 transition economies over the period 1991–2004 as well as the methodology of panel cointegration and causality tests, the empirical findings show that foreign direct investment does exhibit a significant relationship with economic growth, at least for those transition countries that are characterized by high levels of income and have implemented successful privatization programs.