FDI And Economic Growth. Evidence From Simultaneous Equation Models

This paper analyses whether foreign direct investments have an impact on the Romanian economic growth. By means of simultaneous equation methods we obtained evidence of the bi-directional connection between the two, meaning that incoming FDI stimulates economic growth and, in its turn, a higher GDP attracts FDI. Two methods were used in performing the analysis, one considering the relation between the share of FDI in GDP and economic growth in a five-equation system and the second considering the levels of FDI and GDP, respectively, in a two-equation system.