The Foreign Direct Investment and Economic Growth - Case Study for Kosovo

Dr.Sc. Myrvete Badivuku - Pantina, MSc. Jeton Zogjani

Abstract


This research paper will explain the impact and relationship between the Foreign Direct Investment (FDI) and economic growth, Kosovo case. The used data in research are secondary data and cover a period of time between 2008 and 2013. By using STATA program for calculation and by various regression analyses (descriptive statistics, linear regression and correlation) relationships have been identified between involved variables in research, where economic growth is defined as dependent variable, whereas FDI, interest rate and real effective and exchange rate (REER) are defined as independent variables. The main results in this research paper indicate that FDI has a positive relation (0.011) but non-significant effect (T<2) on economic growth while the interest rate has a positive relation (0.076) and a significant effect (T>2) on economic growth in Kosovo. The real effective exchange rate has a negative (-0.347) and non-significant relation (T<2) with economic growth. The main activities of FDI in overall Kosovo's economy are: real estate, transport and telecommunication, financial and manufacture services, construction, etc. The main conclusion is that the Kosovo institutions should create a favorable environment, such as: political stability, enforcement of justice, reduction of trade barriers, Kosovo should also create appropriate policy for protection of foreign investors, investment security, fair competition and institutional support. This will impact the drastic improvement and increase of FDI. In 2013 Kosovo had an FDI percentage of 5% of GDP while in 2007 it was over 13% of Kosovo's GDP.


Keywords


Foreign Direct Investments; Economic Growth; Kosovo; Correlation; Inflation Rate; OLS method; REER; STATA analysis;

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DOI: 10.21113/iir.v5i2.77

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