FDI- EXPORTS-GDP NEXUS IN THE REPUBLIC OF MOLDOVA
FDI- EXPORTS-GDP NEXUS IN THE REPUBLIC OF MOLDOVA

Summary/Abstract: Exports and FDI are important tools of Governments to stimulate economic growth and prosperity. Many countries implemented successfully export led-grow models in their development path. Being a small European transition economy affected by mass migration, Moldova is trying to change its consumption led growth model fueled by remittances by an investment and export growth led model, were FDI have to be an important driver. Though, FDI inflows in Moldova are small comparative to many European countries, the economic growth is slowing down on long term, while there is slight improvement in export competitiveness. The aim of this paper was to analyze the long term causality between FDI, GDP and exports of goods in the Republic of Moldova. Estimations were performed based on the available data for the period 1995-2021. The Granger causality approach has been applied to test the relationship between the 3 variables based on annual data. The authors found a unidirectional causality relationship running from FDI to GDP, FDI to exports, and a Granger causality from GDP to merchandise exports. An impulse-response analysis has been performed based on VECM models. A 1% growth in FDI in Republic of Moldova causes an increase of GDP by 0.09 p.p. and of exports of goods by 0.08%.

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