Foreign Investments and Economic Catching Up: The Case of Hungary
Foreign Investments and Economic Catching Up: The Case of Hungary

Summary/Abstract: Both economic history and theory show us that foreign capital is indispensable in the process of modernization. Countries in Central and Eastern Europe in the late 80s were facing an extremely challenging double task: they had to transform both their political and economic systems. Despite the difficulties most of them tackled all the problems with remarkable success, creating the bases of market economies and democracies simultaneously. Rapid privatization and institution building signed the way of Hungary, the first mover in the transition process, and – as a consequence – strong capital inflow (mostly FDI) occurred. The domination of MNCs has become evident by now, and outward investments began to rise, too. In this paper we analyze foreign direct investments in Hungary, the activities of multinational companies, and the characteristics of outward investments in the last two decades.

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