Foreign Direct Investment: It’s Role in the Economic Growth of Transition Economies

Abstract

The mechanism through which Foreign Direct Investment (FDI) affects growth and vice versa is an aspect of growth developed on in the endogenous growth model, taking into cognisance the impact of human capital and its spill over effects on transition economies .This paper, using panel data estimation methods seeks to understand the impact of FDI on economic growth in transition economies and how this FDI performs with the spill over effects from human capital in the economy.

In addition, this paper also seeks to understand how the political discretion of the preferences of political actors in a nation affects the performance of FDI on growth, focussing on the economies in transition.

Key Words: Foreign Direct Investment, Transition economies, Economic growth