Foreign Direct Investment (FDI) or Remittances? Which Contributes the Most to the Albanian Economy?

Alban Korbi – University of Tirana, Square „Nënë Tereza“, Tiranë, Albania

Blisard Zani – University of Tirana, Square „Nënë Tereza“, Tiranë, Albania

7th International Scientific ERAZ Conference – ERAZ 2021 – Selected Papers: KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT,  Online/virtual, May 27, 2021

ERAZ Conference Selected Papers are published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ERAZ conference partners: Faculty of Economics and Business, Mediterranean University, Montenegro; University of National and World Economy – Sofia, Bulgaria; Faculty of Commercial and Business Studies – Celje, Slovenia; AMBIS University, Prague – Czech Republic; Faculty of Applied Management, Economics and Finance – Belgrade, Serbia

ERAZ Conference 2021 Selected Papers ISBN 978-86-80194-47-9, ISSN 2683-5568, DOI: https://doi.org/10.31410/ERAZ.S.P.2021

Abstract: Foreign direct investment (FDI) and remittances entering an economy often play a very important role in the development and growth of economies year after year. Especially for economies with similar typolo­gies and characteristics like that of Albania, both of these elements promote economic development and serve as financial incentives. This paper aims to assess the contribution of remittances and foreign direct investment in the Albanian economy in the last three decades, through a multifactorial econometric model. The model uses three endogenous variables, the val­ue of remittances, the value of a foreign direct investment and the value of gross domestic product for the time series 1992 – 2019. As it results from the analysis of the econometric model, both remittances and foreign direct in­vestment payments have a positive impact on economic growth and the value of gross domestic product. It is also evident that remittances are the ones that affect the gross domestic product more compared to foreign di­rect investment.

ERAZ Conference

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-Non-Commercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission. 

References

Alfaro, L., & Chanda, A. (2004, October 24). FDI and economic growth: the role of local finan­cial markets. Journal of International Economics Vol. 64, Issue 1, str. 89 – 112.

Barajas, A. (2009). Do workers remittances promote economic growth? Available online: www. imf.org: International Monetary Fund Paper no.09/153.

Blomstrom, M., Lipsey, R., & Zejan, M. (1992). What Explains Developing Country Growth? Available online: http://www.nber.org/papers/w4132.pdf doi:10.3386/w4132.: The National Bureau of Economic Research Working Paper No. 4132.

Borenzstein, E., & Gregorio, J. D. (1998). How does FDI affect economic growth? Journal of International Economics, 115 – 135.

Bramasublamanyan, V. N., Salisu, M., & Sapsford, D. (1996, January 1). Direct Investment and Growth in EP and IS countries. The Economic Journal, Volume 106, Issue 434, str. 92–105, doi:10.2307/2234933.

Carkovic, M., & Levine, R. (2002). Does Foreign Direct Investment Accelerate Economic Growth? Minnesota, USA: University of Minnesota – Department of Finance.

Caves, R. (1996). Multinational Enterprise and Economic Analysis; Cambridge University Press, UK, str. p. 165.

Chami, R., Fullenkamp, C., & Jahjah, S. (2003). Are Immigrant Remittance Flows a Source of Capital for Development? International Monetary Fund Working Paper No. 189. 2003.

Giuliano, P., & Ruiz-Arranz, M. (2009). Remittances, financial development and growth. Jour­nal of Development Economics, 90, 144–152, doi:10.1016/j.jdeveco.2008.10.005.

Lartey, E., & Mendelman, F. (2012). Remittances, Exchange Rate Regimes and the Dutch Dis­ease: A Panel Data Analysis. Review of International Economics, 2012, vol. 20, issue 2, 377-395.

Nair-Reichert, U., & Weinhold, D. (2001, December 23). Causality Tests for Cross‐Country Pan­els: A New Look at FDI and Economic Growth in Developing Countries. Oxford Bulletin of Economics and Statistics, pp. 153–171, doi:10.1111/1468-0084.00214.

Posso, A. (2012, February 23). Remittances and aggregate labor supply: Evidence from six­ty-six developing nations. The developing economics, str. 50, 25–39, doi:10.1111/j.1746- 1049.2011.00153.x.

Ratha, D. (2013). The impact of remittances on economic growth and poverty reduction. Migra­tion and Development no.8, Migration Policy Institute – Policy Brief.