Does FDI Crowd out Domestic Investment in Transition Countries?

Cristina Jude (1, 2)

1 Centre de recherche de la Banque de France
2 LEO - Laboratoire d'économie d'Orleans [2008-2011]

The aim of this paper is to empirically test the hypothesis of FDI led capital accumulation in Central and Eastern European countries. More precisely, we investigate the relationship between FDI and local investment, using a sample of 10 CEEC over the period 1990-2010. We find FDI to crowd out domestic investment, while the effect decreases with time. Our results also indicate that greenfield FDI may develop long run complementarities with domestic investment, while mergers and acquisitions do not prove any significant effect on domestic investment. Finally, financial development seems to foster a certain crowding-in effect in the case of mergers&acquisitions.

Mots clés: investment; FDI; crowding-out; economic transition; financial development

Domaines: Economies et finances

Cristina Jude. Does FDI Crowd out Domestic Investment in Transition Countries?. 2015. ⟨halshs-01252565⟩