Outward foreign direct investment and economic growth in Romania: Evidence from non‐linear ARDL approach

Abstract

Globally, the outward foreign direct investment (OFDI) has significantly increased during recent years. In the light of OFDI's role in determining the GDP growth rate, it is necessary to assess how economic growth rate responds to such outflows. Based on the non-linear autoregressive distributive lag (NARDL) model, the present study investigates the long-run and short-run asymmetric impacts of OFDI on the economic growth in Romania covering the period 1990-2019. The results indicate that both an increase and a decrease in OFDI have a positive and significant impact on Romania's economic growth, with a greater effect arising from the increase in OFDI. Our research adds to the preceding literature by providing new insights into the OFDI-led growth hypothesis. The results of the present study portray the growthenhancing effects of OFDI, which are consistent with the notion that firms conduct OFDI in order to combine domestic output with overseas output to decrease expenditures and to enhance their competitiveness both at global and domestic levels. Thus, an increase in OFDI is both a cause and a consequence of the home country's economic growth.

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Research Methods in a Multinational Business Environment and Implications for Capital Formation: Application of Cross-Sectional Autoregressive Distributed Lag Methods

“… Ameer et al (2017) explored the nexus between FDIO and domestic capital formation particularly in the case of China and concluded that there exists a unidirectional positive long-run causality running from FDIO to aggregate domestic capital, however, a causality relationship does not exist in the short run. While, the results of Amin et al (2020) demonstrate that FDIO increases domestic output as well as overseas production to stimulate their competitiveness worldwide. Neoclassical theories consider that FDI is the crucial factor in the stimulation of domestic capital reserves in addition to the expansion in the total factor productivity 2 ( De Mello, 1997 ; Xu and Wang, 2007 ).…”

“…Foreign direct investment (FDI) fulfills rising investment requirements to boost economic growth in developing countries ( Razzaq et al, 2021 ; Wu et al, 2021 ; Tang et al, 2022 ). Even though developed countries are the principal source of foreign direct investment outflows (FDIOs), developing economies have emerged as the leading sources of FDIO in the last three decades ( Knoerich, 2017 ; Amin et al, 2020 ; Xiang et al, 2022 ). Several multinational companies from developing and emerging countries are investing across the borders globally through FDI.…”

Do taxes affect number of foreign enterprises controlled abroad by Slovak companies in the age of globalization?

“…Some of determinants that has been found as significant for FDI outflow are policies in home country related to foreign trade, financial sector and investment development. [14] outflow also for enhancing their competitiveness. [15] All of these mentioned areas are the building stones of business environment, that surrounds the companies.…”