DOES FOREIGN DIRECT INVESTMENT LEAD TO ECONOMIC GROWTH? EVIDENCE FROM DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, AND LEAST DEVELOPED COUNTRIES

Abstract

This paper investigates the impact of foreign
direct investment on economic growth, on a sample of three
groups of countries, classified according to the criterion of
economic development. The research problem that seeks to
be solved is defined by the question: Do foreign direct
investment affect the economic growth of targeted countries
and in what way? The objectives of the research are to
explain the mechanism of functioning of foreign direct
investment and the implications for macroeconomic growth
parameters, ceteris paribus. The results of the research show
the existence of correlation and determination of the
dependent variable with the variations of the independent
variable. In this way, the main hypothesis of the paper was
confirmed, that foreign direct investment has a stimulating
effect on economic growth and the effect of investment is a
priori determined by the defined economic policy and the
appropriate institutional and legislative framework of the
countries, ceteris paribus. The methods used in this paper are
regression analysis, i.e. simple linear regression, and
analysis and synthesis of previous research and theoretical
findings, in order to draw conclusions by induction. The
analysis of the data confirms that foreign direct investments
have an impact on the economic growth of each group of
countries individually, but that in certain groups this
connection is present. Thus, the results of the research
showed the existence of a relation between FDI and
economic growth, i.e. they emphasized FDI as a significant
predictor of economic growth in the targeted groups of
countries ceteris paribus. The paper represents the author's
contribution to economic theory and practice, and to the
general public, but also to decision-makers in developing
countries. Further research should be directed towards
whether it is possible to influence the increase of GDP by
"copying" a certain country in terms of attracting foreigners.