The Interaction of GDP Growth Rate and FDI in Service Sector - Case of Croatia

Authors

  • Mario Pečarić University of Split, Faculty of Economics, Business and Tourism, Split, Croatia
  • Tino Kusanović University of Split, Department of Professional Studies, Split, Croatia
  • Antoni Šitum

DOI:

https://doi.org/10.7225/toms.v10.n01.023

Keywords:

FDI sectoral structure, Croatia, Service sector, VAR model, GDP growth, Real exchange rate

Abstract

Croatia is characterised by a foreign direct investment (FDI) inflow, mainly in the service sector, which is partly understandable owing to the country's orientation towards tourism. On the other hand, theoretical and empirical research indicates a weak impact of FDI in the service sector on the economic growth of the recipient country. Following the theoretical framework and critical analysis of previous research, the paper, on the example of Croatia in the period q1/2000 - q3/2020, uses the VAR model to analyse the mutual influence of GDP growth rate and FDI in the service sector. The results show that the impact of the GDP growth rate on the FDI inflow into the service sector is more significant and longer lasting than vice versa. The paper emphasises the importance of the adopted growth model for the type of FDI inflows into the recipient country, which in this case is characterised by the appreciation of the real exchange rate as an indicator of the country's competitiveness, whose impact on FDI inflow into the service sector is positive and long lasting.

Published

2021-04-20

How to Cite

Pečarić, M., Kusanović, T. and Šitum, A. (2021) “The Interaction of GDP Growth Rate and FDI in Service Sector - Case of Croatia”, Transactions on Maritime Science. Split, Croatia, 10(1). doi: 10.7225/toms.v10.n01.023.

Issue

Section

Regular Paper
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