FDI FLOWS AND HOST COUNTRY ECONOMIC DEVELOPMENT

Abstract

The propose of the paper is to analyze the relation between economic development and FDI flows. FDI should have a positive effect on economic growth as a result of positive externalities generated for host countries by multinational companies (MNCs). There are several studies on this issue, some of them pointing out that FDI has a considerable positive effect on host country economic growth but the magnitude depends on host country conditions, while other works indicate that there is no powerful interdependence between inward FDI to host country economic growth. However, it is generally accepted that there is a functional link between the degree of openness of trade and foreign direct investment, especially in developing countries.

Keywords

• economic growth
• foreign direct investment inflows
• absorptive capacity
• host / receiving country
• home / source country