The Impact of Exports and FDI on Economic Growth : Evidence from Nine European Union Member States

Abstract

Exports and FDI are part of the macroeconomic variables which some researchers have studied through a cross-country approach to assessing the dynamic in economic growth. This study investigates the significance of exports and FDI in some selected European Union member states including Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, and Slovakia. The study used data from the World Bank from 1995 to 2021 and analyzed it through a panel model estimation. The econometrics test employed includes the pooled model, stationarity test, panel specification, and Fixed effect model. The stationarity test indicated that the variables(exports, GDP, and FDI) were non-stationarity at a level and integrated with the first-order difference. The panel specification test showed that the fixed effect model was the most adequate over the pooled and random effect models. The results from the fixed effect model indicated that exports and FDI positively stimulate economic growth in these selected countries. The results further show that Poland’s economy enjoyed more impacts from exports and FDI, followed by Romania, whereas Estonia’s economy witnessed the lowest impact. The findings revealed that exports support economic development in these EU countries more than FDI. The study recommends that policymakers implement sound investment policies to attract more FDI inflows.

Topical issues of the formation of an effective economic and social policy in Cambodia

“…FDI that focuses on exportoriented industries, like garment manufacturing, can significantly contribute to GDP growth by increasing exports and generating foreign currency. In contrast, FDI in resource extraction may have a smaller impact on overall GDP growth, especially if the resources are simply exported without being processed domestically [13]. On the other hand, mergers and acquisitions may result in efficiency gains through restructuring but could also lead to job losses or reduced competition in certain sectors [14].…”