Research background: In order to contribute to economic growth, inward foreign direct investments (FDI) need to meet certain economic and social criteria. Besides the contribution to the level of education, technological level, financial development, tax system, trade and investment policies, and market size, FDI should also encourage domestic investments (crowding in-effect). Purpose of the article: This paper examines the importance and effects of the inward and outward direct investments, gross savings as well as real growth on domestic investments in the case of Western Balkan countries (North Macedonia, Serbia, Albania, Kosovo, Montenegro, and Bosnia & Herzegovina). Thus, the logic behind this research is to determine whether and in which direction are aimed effects of FDI. Methods: The relation between FDI and domestic investments has been analyzed by employing panel data approach with and without constrains on cross-sections. The study is based on a panel data of six countries for the period between 2007-2018, (i.e., in total, we have 66 observations). Findings & Value added: The general conclusion from this analysis confirm that inward foreign direct investments in the Western Balkans, as well as real economic growth both significantly and positively affect the domestic investments.

There is no doubt that financial intermediation plays a crucial role in the economy of both developed and developing countries. At the same time, the banking sector represents the leading financial intermediary through which developing countries can enhance or boost economic growth in their country. In addition, importance is given to the profitability and efficiency of the banking sector for fulfilling such macroeconomic objectives of the country. In this regard, the main objective of this study is to analyze the efficiency of the banking sector of Western Balkans countries by utilizing secondary data collected from the official reports of the National Banks of the respective countries for the period 2004 – 2020. Thus, Data Envelopment Analysis was implemented to analyze the efficiency of the banks in Western Balkan for the period 2004 – 2020. Moreover, DEA results conclude that banks in Western Balkans operate at a good efficiency level due to an average score above 85% from 2004 – 2020. Montenegro had a continuous high-efficiency score during the last five years, followed by Serbia, Bosnia and Herzegovina, Kosovo, Albania, and North Macedonia. Due to the results of the efficiency of the banking sector of the Western Balkans and the specific analysis of the Republic of North Macedonia case, specific policy recommendations are given in this regard to enhance the higher efficiency of the banks in the Republic of North Macedonia.