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Open AccessArticle

Exploring Foreign Direct Investment–Economic Growth Nexus—Empirical Evidence from Central and Eastern European Countries

1
Department of Finance, The Bucharest University of Economic Studies, Bucharest 010374, Romania
2
Department of Economic and Administrative Sciences, Faculty of Administration and Business, University of Bucharest, Bucharest 050107, Romania
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(19), 5421; https://doi.org/10.3390/su11195421
Received: 23 June 2019 / Revised: 25 September 2019 / Accepted: 26 September 2019 / Published: 30 September 2019
(This article belongs to the Special Issue Sustainable Economic Development: Challenges, Policies, and Reforms)
This study aims to examine the link between foreign direct investment (FDI) inflows and economic growth, also considering several institutional quality variables, as well as sustainable development goals (SDGs) set in the 2030 Agenda for Sustainable Development. By estimating panel data regression models for a sample of 11 Central and Eastern European countries, from 2003 to 2016, the empirical outcomes provide support for a non-linear relationship between FDI and gross domestic product per capita. Regarding institutional quality, it is found that control of corruption, government effectiveness, regulatory quality, rule of law, and voice and accountability positively influence growth, while political stability and absence of violence/terrorism is not statistically significant. Moreover, SDGs such as poverty, income distribution, education, innovation, transport infrastructure, and information technology are noteworthy drivers of growth. The outcomes of panel fully modified and dynamic ordinary least squares partly confirm the findings. The panel vector error-correction model Granger causalities provide support for a short-run one-way causal association running from FDI to growth and a long-run two-way causal connection among FDI and growth. Furthermore, in the long run, unidirectional causal relationships running from each institutional quality indicator to economic growth and FDI are set out. View Full-Text
Keywords: foreign direct investment; economic growth; panel data regressions; panel co-integration; Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS); panel vector error-correction model; Granger-causality foreign direct investment; economic growth; panel data regressions; panel co-integration; Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS); panel vector error-correction model; Granger-causality
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MDPI and ACS Style

Gherghina, Ș.C.; Simionescu, L.N.; Hudea, O.S. Exploring Foreign Direct Investment–Economic Growth Nexus—Empirical Evidence from Central and Eastern European Countries. Sustainability 2019, 11, 5421. https://doi.org/10.3390/su11195421

AMA Style

Gherghina ȘC, Simionescu LN, Hudea OS. Exploring Foreign Direct Investment–Economic Growth Nexus—Empirical Evidence from Central and Eastern European Countries. Sustainability. 2019; 11(19):5421. https://doi.org/10.3390/su11195421

Chicago/Turabian Style

Gherghina, Ștefan C.; Simionescu, Liliana N.; Hudea, Oana S. 2019. "Exploring Foreign Direct Investment–Economic Growth Nexus—Empirical Evidence from Central and Eastern European Countries" Sustainability 11, no. 19: 5421. https://doi.org/10.3390/su11195421

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