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Reinvestment of earnings in Polish FDI inflows

Author

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  • Aneta Kosztowniak

    (Department of Economic Policy and Banking, Economics and Finance Faculty, Kazimierz Pulaski University of Technology and Humanities in Radom, ul. Chrobrego 31, 26-600 Radom, Poland)

Abstract

The aim of this paper is to diagnose the cause-and-effect relationships between reinvestment of earnings (RoE) and other components of FDI inflows and GDP in Poland in the years of 2004–2019, using the VECM model**. Changes in the structure of FDI inflows in Poland are in line with the stages of the FDI life cycle. The increase in the share of RoE in the structure of these investments is also accompanied by an increase in the impact and the degree of explanation of changes in GDP. Studies confirmed that changes in the structure of FDI in Poland was adequate to the theoretical cycle of FDI life. The increase in the share of RoE in the structure of FDI inflows is accompanied by a decrease in equities. The VECM model, impulse response function and decomposition analysis confirmed that among FDI components mainly equities, and next, RoE have large participation in the degree of explanation of GDP. In the short-term, mainly equity has the most important impact on GDP, and additionally, RoE. In the long-time, the importance of equity decreases, while increases the impact of RoE, and also, debt instruments. The increase in the share of RoE in the structure of FDI inflows accompanied by the increase in the impact of these investments on GDP changes.

Suggested Citation

  • Aneta Kosztowniak, 2021. "Reinvestment of earnings in Polish FDI inflows," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 71(3), pages 465-485, September.
    • Handle: RePEc:aka:aoecon:v:71:y:2021:i:3:p:465-485
    DOI: 10.1556/032.2021.00023
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    Keywords

    FDI; reinvestment of earnings; GDP; Poland; VECM; the response function; variance decomposition;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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