Is There Any Causality Between Fdi and Remittance in Croatia?

Abstract

Today, the inflow of foreign remittances is an important development factor associated with migration processes. At the same time, also a factor that has proven to be more resistant to global economic adversities than the inflow of foreign direct investment (FDI) or the inflow of overseas development aid (ODA). Foreign remittances in recent years have exceeded global amounts of FDI and become the prevalent basis of external financing in low- and middle-income countries. What is interesting to point out is that Croatia, as a developed country, continuously records a higher level of inflows of foreign remittances compared to the inflow of FDI. Both foreign remittances and FDI are today an important source of external financing for many countries. The fact is that Croatia is the most dependent on remittances compared to other EU member states; the share of foreign remittances in GDP at the EU level is 0.8%, while at the Croatian level it is 6.6%. In this research, the author's goal is to determine whether there is a causal relationship between FDI and foreign remittances in Croatia. The direction of causality between the two observed variables will be examined using the Granger causality test. The research will cover the time period from 2000(1) to 2022(01). Considering the significance that both observed variables have in the Croatian economy, it is expected that the research results will have important political implications.