The Impact of International Trade and Foreign Direct Investment on Economic Growth of Western Balkan Countries

Session

Management, Business and Economics

Description

The aim of this paper is to find the impact of foreign direct investment and international trade on economic growth. In order to obtain that, the 6 countries of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia) were included in the analysis for the time period 2008 - 2022. The regression analysis using Fixed Effects Models found all the variables to be statistically significant. During the analyzed period, in these countries foreign direct investments have a negative and statistically significant impact. On the other hand, international trade measured with the indicator of trade openness (total exports and imports as % of GDP) has a positive and statistically significant impact on economic groëth. In addition to the two variables from the field of international economics, two additional variables are also included in the model: population and inflation. The population is found to have negative impact on economic growth, statistically significant but with a very low coefficient, while inflation has a positive and statistically significant impact.

Since the negative impact of foreign direct investments was found, it is recommended that the policymakers take appropriate measures to improve the situation in the region. It is recommended to ensure that obstacles and barriers to trade are minimized, to ensure favorable conditions for the promotion of foreign direct investments, to create a friendly environment by establishing political and economic stability in the region, and to make efforts towards trade liberalization by applying export-oriented strategies.

Keywords:

Economic Growth, Foreign Direct Investment, International Trade, Western Balkans, Inflation, Population.

Proceedings Editor

Edmond Hajrizi

ISBN

978-9951-550-95-6

Location

UBT Lipjan, Kosovo

Start Date

28-10-2023 8:00 AM

End Date

29-10-2023 6:00 PM

DOI

10.33107/ubt-ic.2023.191

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Oct 28th, 8:00 AM Oct 29th, 6:00 PM

The Impact of International Trade and Foreign Direct Investment on Economic Growth of Western Balkan Countries

UBT Lipjan, Kosovo

The aim of this paper is to find the impact of foreign direct investment and international trade on economic growth. In order to obtain that, the 6 countries of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia) were included in the analysis for the time period 2008 - 2022. The regression analysis using Fixed Effects Models found all the variables to be statistically significant. During the analyzed period, in these countries foreign direct investments have a negative and statistically significant impact. On the other hand, international trade measured with the indicator of trade openness (total exports and imports as % of GDP) has a positive and statistically significant impact on economic groëth. In addition to the two variables from the field of international economics, two additional variables are also included in the model: population and inflation. The population is found to have negative impact on economic growth, statistically significant but with a very low coefficient, while inflation has a positive and statistically significant impact.

Since the negative impact of foreign direct investments was found, it is recommended that the policymakers take appropriate measures to improve the situation in the region. It is recommended to ensure that obstacles and barriers to trade are minimized, to ensure favorable conditions for the promotion of foreign direct investments, to create a friendly environment by establishing political and economic stability in the region, and to make efforts towards trade liberalization by applying export-oriented strategies.