Foreign Direct Investment and Economic Growth in the Republic of Kosovo—Empirical Evidence

Abstract

Whether Foreign Direct Investment (FDI) is beneficial to host country growth or not, it is a question debated since a long time (Acaravci & Ozturk, 2012). This paper will examine the flow of FDI and their impact on economic growth in the Republic of Kosovo. This correlation between FDI and economic growth will be studied through regression (Quantile Regression Median). The results of the study will be obtained using multiple regression to evaluate the effect of FDI on the economy, using secondary annual data from 2007 to 2017. In addition to the basic model to be used to assess the impact of FDI on total growth amount, we have also decomposed them into the second model: FDI in manufacturing and FDI in services as well as other FDI. The research results show that the impact of total FDI and FDI in manufacturing is negative and insignificant while the impact of FDI in services and other FDI is positive but insignificant to economic growth in Kosovo. Due to the importance of FDI, as an important source of capital in a transition country such as Kosovo, these results are informational for decision-makers to improve policies in order for the country to become more attractive in attracting FDI.