Relationship Between Foreign Direct Investment Inflow and Unemployment in the Slovak Republic Cover Image

Vzťah medzi prílevom priamych zahraničných investícií a nezamestnanosťou v Slovenskej republike
Relationship Between Foreign Direct Investment Inflow and Unemployment in the Slovak Republic

Author(s): Lubomir Darmo, Marcel Novák, Ján Lisý
Subject(s): Politics / Political Sciences, Social Sciences, Supranational / Global Economy
Published by: Vysoká škola ekonomická v Praze
Keywords: foreign direct investment; unemployment; gross domestic product; Granger causality; impulse-reaction function

Summary/Abstract: The inflow of foreign direct investment (FDI) is linked to several positive effects, which result in growing gross domestic product (GDP) and reduced unemployment rate in the host country. The level of GDP and the unemployment rate determine the FDI inflow, but contrariwise, FDI inflow has an impact on these variables. In the paper, we investigate which of these variables is the impulse and which is consequently determined by the impulse variable. The objective of the paper is to examine the length of the FDI effect in a host economy as well as the impact of FDI inflow on the unemployment rate using vector autoregression and impulse-reaction functions. Based on results of the Granger causality, we analyse linkages between FDI inflow, unemployment rate and GDP growth in the Slovak Republic in the period 1995–2018. The results show that the impulse comes from the unemployment rate, which consequently affects the FDI inflow. However, the length of this effect is very short.

  • Issue Year: 68/2020
  • Issue No: 4
  • Page Range: 443-461
  • Page Count: 19
  • Language: Slovak