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Var / Vec: Fdi – Net Exports Romania

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  • Bogdan-Daniel, FLOROIU

Abstract

We consider it important to analyze FDI-NX relationship in Romania, in terms of econometrics to demonstrate if there is one relationship between the two indicators investigated, and how this relationship works. Econometric methodology used in this study is the vector autoregression (VAR). The choice of methodology is justified by the nature of the investigation. Macroeconomic phenomena manifest as complex dynamic systems with feedback and mutual causality. Consequently, the only type analysis system (simultaneous equations) are able to capture the interconnections between macroeconomic variables. Given that cointegration relationship exists between the two variables, we constructed the VEC model. The main result of this study was that the FDI inflows and exports are cointegrated in the period of analysis. The finding that the time series variables were cointegrated implies that there was a long term relationship between them. For the cases analyzed is confirmed generally valid hypothesis that there is a correlation in both direction between FDI and NX. In these circumstances, the government must find solutions to attract FDI because in this way and net exports will increase which will contribute to the economic development of Romania. For rapid expansion of exports, trade liberalization policies have to promote on sectors that will trigger FDI inflows to Romania.

Suggested Citation

  • Bogdan-Daniel, FLOROIU, 2016. "Var / Vec: Fdi – Net Exports Romania," Management Strategies Journal, Constantin Brancoveanu University, vol. 31(1), pages 27-36.
    • Handle: RePEc:brc:journl:v:31:y:2016:i:1:p:27-36
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    References listed on IDEAS

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    More about this item

    Keywords

    VAR; VEC; FDI; Net Exports; correlation; cointegration;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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