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Does outward foreign direct investment crowd in or crowd out domestic investment in central, east and southeast europe countries? an asymmetric approach

Author

Listed:
  • Safet Kurtović

    (University of Travnik)

  • Nehat Maxhuni

    (University Union Nikola Tesla)

  • Blerim Halili

    (University Union Nikola Tesla)

  • Bujar Krasniqi

    (KAF Institute for Accounting, Audit and Finance)

Abstract

The previous empirical literature, relevant to Central, East and Southeast European (CESEE) countries, has mostly examined the effect of inward FDI but neglected the effect of outward foreign direct investment (OFDI) on domestic investment. Domestic companies and local foreign subsidiaries owned by multinational companies are the main sources of OFDI from the CESEE countries. The growth in the volume of OFDI from CESEE countries is a consequence of strengthening the competitiveness of companies. Despite this, these countries are still net recipients of FDI, because they get significantly higher FDI inflow than FDI outflow. We used the nonlinear autoregressive distributed lag (NARDL) model, a sample of 13 CESEE countries and the annual data for the period from 1995 to 2019 in this study. In the long run, we found there to be an asymmetric effect from OFDI on the domestic investments of Bulgaria, Estonia, Latvia, Poland, Russia, Slovenia and the Ukraine. We also found that OFDI has a crowding-out effect on the domestic investment of Bulgaria, Poland and the Slovenia, while it has a crowding-in effect on the domestic investment of Estonia, Latvia, Ukraine and the Russia.

Suggested Citation

  • Safet Kurtović & Nehat Maxhuni & Blerim Halili & Bujar Krasniqi, 2022. "Does outward foreign direct investment crowd in or crowd out domestic investment in central, east and southeast europe countries? an asymmetric approach," Economic Change and Restructuring, Springer, vol. 55(3), pages 1419-1444, August.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09352-6
    DOI: 10.1007/s10644-021-09352-6
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    More about this item

    Keywords

    Asymmetry; Outward FDI; Domestic investment; Crowding-in effect; Crowding-out effect;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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