IMPACT OF FOREIGN DIRECT INVESTMENTS ON THE ECONOMIC DEVELOPMENT OF BOSNIA AND HERZEGOVINA

Abstract

Foreign direct investments represent a very important part of the economic growth of any economy, especially developing countries. They have several positive effects, such as reduction in unemployment, an increase in disposable income, an improvement in the country’s external financial position, and a more favorable credit rating. The paper points out the concept of the international capital movements, it presents the differences between portfolio and foreign direct investments and shows their positive and negative sides. A comparative analysis was performed by observing and comparing movement of foreign direct investments in Bosnia and Herzegovina in the period from 2004. to 2019. The initial hypothesis of the paper is the assumption that foreign direct investments have statistically significan impact on the economic development of Bosnia and Herzegovina. This has been proved by applying a multiple linear regression model in the empirical research part.