The Role of FDI Inflow on the Post – Communist Albania’s Economic Growth

In this study we assess the role of FDI inflow on the post-communist Albania’s economic growth. The country has experienced a satisfactory growth rate during the transition period to market economy that followed the collapse of communism in the early 1990s. The opening of the country to the foreign world has been accompanied by a significant inflow of FDI that are found to have played a growth promoting role. The analysis is performed using annual data series from 1992 to 2012 obtained from the WDI. The ARDL bounds testing results indicate a significant long-term relationship between the country’s economic growth and the inflow of FDI. More specifically, a 10% increase in the FDI inflow is accompanied by a 1.41% increase of its economic growth rate. This finding implies that the country’s policymakers should try to create a favourable climate for FDI inflow to accelerate its economic growth.

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