Vector Error Correction Model on FDI and their Impact in the Republic of Macedonia
Journal
Zagreb International Review of Economics & Business
Date Issued
2018
Author(s)
DOI
10.2478/zireb-2018-0012
Abstract
The subject of this paper is the foreign direct investment (FDI) inflow in Macedonia and
its impact upon the economic growth and development of the country. Its basic purpose
is to analyse the interconnection of FDI with a number of economic, political and institutional
variables in Macedonia. We decided to apply Vector Error Correction Model
(VECM) on FDI impact upon the Macedonian economy. The FDI indicator is calculated
as a function of certain fundamental economic variables (GDP growth rate, labor productivity
rate, openness to trade, current account balance) as well as of Worldwide Governance
Indicators (control of corruption, government effectiveness, political stability,
regulatory quality and rule of law). Results obtained by the econometric model should
provide relevant conclusions on the impact of the up-to-date FDI inflow upon the growth
and development of the Macedonian economy.
its impact upon the economic growth and development of the country. Its basic purpose
is to analyse the interconnection of FDI with a number of economic, political and institutional
variables in Macedonia. We decided to apply Vector Error Correction Model
(VECM) on FDI impact upon the Macedonian economy. The FDI indicator is calculated
as a function of certain fundamental economic variables (GDP growth rate, labor productivity
rate, openness to trade, current account balance) as well as of Worldwide Governance
Indicators (control of corruption, government effectiveness, political stability,
regulatory quality and rule of law). Results obtained by the econometric model should
provide relevant conclusions on the impact of the up-to-date FDI inflow upon the growth
and development of the Macedonian economy.
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