Research On The Influence Of FDI Penetration Degree On Economic Growth In EU Transition Countries

At present, EU is the apotheosis of regional economic organizations. EU is different with other integrated economic union,such as North American Free Trade Area. EU not only include developed and developing countries,but also include transition countries.Transition countries in EU, except Slovenia, are derived from the former Soviet Union and Eastern European. Between EU transition countries and CIS,the common is economic transformation from mandatory planning economy to market economy;the difference is that EU transition countries has another object during transitional period,that is to join to EU. Thus, EU transition countries need to meet accession requirements from EU, one of which is to allow foreign capital free in and out. Moreover, EU did an timeable about it to its transition countries.Whether are EU transition countries different with CIS in the extent of FDI penetration? And if it is, whether does the difference stems from its economic transformation background with the dual goals? If it does, how does the level of FDI penetration affect economic growth? If it does, how does economic growth rate of EU transition countries change with the level of FDI penetration?And if it does, what is the extent of economic decline of EU transition countries under the condition of the infection of financial crisis? These questions deserve to explore. But now the related literature is scarce.Therefore, based on the related theories of FDI and economic growth, the dissertation discusses several items deeply.The first, the dissertation reviewed the level of FDI and economic growth of EU transition countries since 1990s. It found that the extent of FDI penetration of EU transition countries is higher than other countries of EU, CIS countries and the world,and found that the gap after EU transition countries accession to EU is much higher than before.The second, the dissertation analysed the motivation of FDI inflow in EU transition countries in policy and other aspects in order to explore whether the extent of FDI is affected by economic transformation with dual objects. It found that there are two restricted conditions to cause domestic FDI policy further liberalisation. The first is inefficient privatization practice based on domestic-owned capital with rather limited government financial expenditure. The second is the requirement from EU that is to oblige EU transition countries to allow foreign capital free flow in and out.The third, using the panel data model, the dissertation analysed whether the extent of FDI penetration has an effect on economic growth in EU transition countries. There are three conclusions. The first is that the higher the extent of FDI penetration is, the weaker its positive effect on economic growth is. The second is that after accession to EU, the influence of FDI penetration degree on economic growth in EU transition countries is similar to EU other countries’.The third is that this influence is different with CIS countries’, and the extent of the influence is weaker than CIS countries’.The fourth, using the VAR model, the dissertation did an impulse response analysis about the effect of FDI penetration on economic growth. It found that pulse incubation effect of FDI penetration when positively shocked on economic growth is similar to EU other countries’, but different with CIS countries.The fifth, using the cross-section data model with data during 2008 financial crisis period, the dissertation analysed the effect of FDI penetration degree on the extent of economic growth rate change. There are two conclusions. The first, same as EU other countries, it is more sensitive to economic crisis for the reaction of economic growth rate of EU transition countries than CIS countries’. The second, between EU transition countries and EU other countries, the higher the extent of FDI penetration is, the more the risk of economic growth rate decrease is, and the weaker the ability of economic recovery is.In conclusion,the extent of FDI penetration of EU transition countries is higher than other countries of EU and CIS countries. Its economic transition with dual objects has decisive effect on the level of FDI penetration. Based on panel data model and VAR model, the analysis shows that EU membership has an important effect on the influence of FDI penetration degree on economic growth in EU transition countries. That is,EU transition countries is similar to EU other countries in the case of the effect of FDI penetration degree on economic growth.