| Summary: | The goal of this research is to investigate the relationship between economic
growth and foreign direct investment inflows in the European Union (EU-28) in
the period of the recent economic crisis. Panel data approach and Bayesian
techniques are employed to solve the problem of a short set of data (2008–2014).
The panel data approaches (panel vector-autoregressive model and Bayesian
random effect models) identified a reciprocal and positive relationship between
FDI and economic growth in EU-28 starting with 2008. The individual approach
based on Bayesian linear regressions identified this tendency as being specific for
most of the EU-28 countries. However, there are some countries for which higher
FDI did not generate economic growth and some countries where higher GDP did
not attract more FDI and FDI did not bring economic growth. According to cluster
analysis, the disparities among countries regarding the FDI distribution according
to GDP growth and GDP rate distribution according to FDI diminished in 2014
compared to 2008. The basic conclusion is that on overall in the European Union
there was a reciprocal relationship between economic growth and FDI since the
beginning of the crisis with a tendency of reducing disparities between countries in
attracting FDI.
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