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

Abstract

Economic theory suggests that free capital
flows increase the efficiency of the resource allocation, and
stimulate economic growth. Foreign direct investment (FDI)
is seen as a kind of cure for all economic problems in
countries that do not have a sufficient level of accumulation
for starting economic growth. In this paper we will
investigate the impact of FDI on economic growth in
Commonwealth of Independent States (Armenia, Azerbaijan,
Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russian
Federation, Tajikistan and Ukraine) for the 2000-2015
period. Our assumption is that increase in FDI inflow will
have positive impact on economic growth. The analyisis was
carried out using the ARDL (Pooled Mean Group/AR
Distributed Lag Models). This model is particularly
convenient in a situation where all variables are stationary
at different levels. The results shows strong and positive
impact of FDI on economic growth.