Volume : 3, Issue : 3, March - 2014

Impact of Foreign Direct Investment on Economic Growth of Albania

Dr. Alketa Vangjeli, Xhensila Abazi

Abstract :

 Foreign direct investment (FDI) is a very important segment of economic activity of a country, due to the effects that ing the latter. Albania, like other South-East European countries, opened its economy to FDI because it expected foreign capital to speed up the process of transformation and economic growth. Given contrasting evidence in the literature pertaining to the impact of FDI on the economy and in order to attract or channelize FDI in the host country, there is a need for country-specific study and its policy analysis. We take the case of Albania and test the FDI-growth nexus for this nation. The data used in this study has spanned over the period of 1992 till 2012. Besides FDI, four other variables Debt, Trade, Inflation and Domestic Investment have been included in the study, to regress upon GDP of this country. Our findings indicate that Albania’s economic performance in the long run is positively affected by FDI while in the short run it was positively affected as well as by trade and negatively affected by the inflation.