FDI and Economic Growth: The Case of Baltic Countries

Abstract

During the early stages of transition from socialism to capitalism, transition countries experienced a sudden and big initial recession. In the transition period, they look for substantial amounts of finance in order to reverse their negative growth performances. In this context, foreign direct investments (FDI) can be seen as one the most important factors to foster economic growth in transition countries. FDI-economic growth relationship is a much studied topic but it has not lost its importance. Since there are few studies about Baltic countries, this paper explores the interactions between FDI and economic growth of Baltic countries. This is an empirical study which uses panel data method for the 1996-2008 period. At the end, it is founded that FDI has a positive effect on economic growth in Baltic countries.