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The Impact of Different Forms of Foreign Capital Inflow on GDPpc in CEE Countries during the Crisis up to 2012

Author

Listed:
  • Goran Pitic

    (Singidunum University, Serbia)

  • Nebojsa Savic

    (Singidunum University, Serbia)

  • Lidija Barjaktarovic

    (Singidunum University, Serbia)

  • Snezana Konjikusic

    (Singidunum University, Serbia)

Abstract

This paper represents further analysis of the authors of previous research on the impact of foreign capital inflow on GDPpc. The analysis includes nine countries of Central and Southeastern Europe - CEE-9 in the period 2005-2012. The previous research has shown that foreign capital inflow (foreign direct investment /FDI/, portfolio investment /PI/, remittances /REM/ and cross-border credits/CBC/) had an impact on an increase in GDPpc and that CBC inflow had the greatest impact on an increase in GDPpc in the period 2005-2012. In this paper, we use correlation and panel regression in order to determine the cause and impact of the available source of financing on the level of GDPpc. Research showed that the influence of the crisis was evident from 2008 onwards and that CBC had the greatest impact on an increase in GDPpc in the period 2005-2012. Under conditions of a lack of financial resources from domestic sources, coupled with an insufficiently attractive business environment, CBCpc inflow had the greatest impact on an increase in GDPpc. Such a high significance of CBCpc is the result of the fact that CEE-9 failed to create a sufficiently attractive business environment. In an attempt to catch up with advanced EU economies, CEE-9 had to finance the increasing amount of investment from the relatively most expensive sources, such as CBCs, during the crisis. The problems related to the quality of the business environment and underdeveloped institutions contributed to a weak relationship between FDIpc and GDPpc. A weak indirect relationship also exists between PIpc and the level of GDPpc. A strong indirect relationship between REMpc and GDPpc was also observed. The correlation analysis showed that GDPpc was directly and strongly related to CBCpc.

Suggested Citation

  • Goran Pitic & Nebojsa Savic & Lidija Barjaktarovic & Snezana Konjikusic, 2014. "The Impact of Different Forms of Foreign Capital Inflow on GDPpc in CEE Countries during the Crisis up to 2012," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(2), pages 70-77.
    • Handle: RePEc:ejn:ejefjr:v:2:y:2014:i:2:p:70-77
    DOI: 10.15604/ejef.2014.02.02.006
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    Cited by:

    1. Hisham J. Bardesi, 2016. "The Impact Of Fdi On Growth Of Saudi Economy: An Empirical Evaluation Of Manufacturing Sector," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 4(3), pages 1-13.

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