Challenges of the Knowledge Society (May 2012)
HOW TO SUSTAIN ECONOMIC PERFORMANCE? ECONOMIC GROWTH AND ITS IMPACT FACTORS
Abstract
This paper intends to render several important factors of impact on economic growth and to describe the particular types of relationships of the latter with each one of its influencing elements. In order to correctly determine such issue, we have resorted to three carefully selected models that have been estimated and compared so as to identify the most adequate and representative regression. For this purpose we have performed an analysis based on cross-section annual data for 105 countries spread all over the world. After having tested and rejected certain exogenous variables initially considered, such as imports or exports, we have finally retained the external debt and foreign direct investments as explanatory items of the dependent variable. The results revealed that both of them positively affect the gross domestic product of the analysed countries, this one being inelastic in relation to the exogenous variables considered. Even if the relationship between the economic growth and the external debt of a country is usually negative, as the money exit out of the country due to the debt service causes non-achieved potential investments, yet, there is an inflexion point up to which the external debt has a positive influence on economic growth by the increase of the investments funds acquired as result of the external credit contracting, this being the case reflected by our study. As for the relationship existing between foreign direct investments and GDP, the economic theory confirms that FDI and economic growth are directly correlated, the former contributing to technical progress, production increase and, finally, to the improvement of the living standard.
