THE EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN THE EUROPEAN UNION

MILUTINOVIĆ Sonja (Sonja Milutinović, MSc. Teaching Assistant at Faculty of Hotel Management and Tourism, Vrnjačka Banja. University of Kragujevac), sonja.milutinovic@kg.ac.rs
STANIŠIĆ Tanja

Foreign direct investment (FDI) is seen as a major mechanism for development, and with international trade, a fundamental part of an open and successful international economic system. This paper examines the effect that FDI has on economic growth in the case of the European Union (EU). The initial assumption of the paper is that FDI has a positive impact on economic growth. Correlation and regression analysis were used to examine the interdependence between FDI and gross domestic product (GDP), as a measure of economic growth. The results of the research show a negative interdependence between FDI and GDP and that there is no positive impact of FDI on the value of GDP in the EU in the observed eleven-year period (from 2005 to 2015).

Keywords: foreign direct investment, economic growth, European Union, multinational corporations, host country, spillover effects