Open AccessThe Effects of FDI on Greek Economy: An Empirical Analysis
Author(s) -
Pavlos Stamatiou,
Nikolaos Dritsakis
Publication year - 2019
Publication title -
international journal of accounting and finance studies
Language(s) - English
Resource type - Journals
eISSN - 2576-201X
pISSN - 2576-2001
DOI - 10.22158/ijafs.v2n2p39
Subject(s) - cointegration , variance decomposition of forecast errors , foreign direct investment , economics , granger causality , causality (physics) , impulse response , econometrics , macroeconomics , unemployment , error correction model , monetary economics , mathematics , mathematical analysis , physics , quantum mechanics
This paper investigates the effect of Foreign Direct Investment (FDI) on economic growth in Greece, within a framework that also accounts unemployment rate, using annual data covering the period 1970 to 2017. Several econometric models are applied including the ARDL bound test approach for cointegration as well as ECM-ARDL model for causality. The results of the study confirm the existence of a long run relationship among the examined variables. The Granger causality results indicated a strong unidirectional causality between economic development and foreign direct investments with direction from economic development to foreign direct investments. Finally, the variance decomposition method and the impulse response functions are used to test the strength of causality between the variables. The results of the study offer new perspectives and insight for new policies for sustainable economic development, increasing investments and reducing unemployment.