Foreign Direct Investments in Romania

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FOREIGN DIRECT INVESTMENT (FDI)
IN ROMANIA
- Definitions, theories, benefits.
Characteristics of econometric modeling
PhD. Senior Lecturer Gheorghe SĂVOIU

PhD Candidate Lecturer Suzana POPA
University of Pitesti
Abstract
This paper analyzes some characteristics of economic and econometric literature in the field of FDI after 1990, in Romania, as well as some specific issues in the process of practical modelling. A more detailed presentation of John Harry Dunning’s eclectic theory and a simple presentation of the theory of de-investment complete the general theoretical presentation of FDI. A first problem after the definition, life cycle, similarities and differences between portfolio and direct foreign investment, after the benefits of FDI, is given by the outstanding dynamics and structure of FDI. Some characteristic features of the value oscillation and structural dynamics of gross capital formation (GCF), gross capital fixed capital formation (GFCF) and gross domestic savings (GDS) in GDP are relevant for the specificity of the phenomenon of FDI in Romania after 1990.

Key words: foreign direct investments (FDI), econometric model, foreign portfolio investments (FPI), matrix of correlations. ***
In the new century, which he have recently entered, the signification of FDI has grown steadily and rapidly as global importance (according to The Economist, 2001, “FDI is globalisation in its most potent form”), on a par with an increase in the value and weight of that phenomenon, which has come to represent currently over 20% of the world GDP.

An international investment implies the existence of at least two economic agents, an issuing agent and a receiving agent, located in different national economic spaces, as well as an investment flow from the issuer to the recipient. The investment flows can be directed towards a receiving economy, or destination (inflow), conceptually representing investments, or can be generated by an issuing economy or investment source (outflow), meaning the investment outflows. Closely related to the clinical flow investment issuer and the receiver can distinguish foreign portfolio investment (ISP) and foreign direct investment (FDI), first holding a high migration potential, completely unstable character, Romanian Statistical Review nr. 1 / 2012

recasting itself as the “hot money “while the second category involves a long term relationship and lasting interest implies a control performed by a resident entity in one economy in an enterprise resident in another economy. Specificity of FDI, reflected in the diversity of its theories and models The dictionary definitions are still torn between the micro- and the macro-economic significance.

FDI definitions with a micro-economic
impact
FDI occurs when an individual or firm
acquires contro-lling interest in productive
assets of another country.
The New Palgrave Dictionary of Economics

FDI means an investment abroad, usually
where com-pany being invested in is
controlled by the foreign cor-poration.
Investopedia.

FDI definitions with a macro-economic impact
FDI stands for Foreign Direct Investment, a
component of a country’s national financial
accounts. FDI is investment of foreign assets
into domestic structures, equipment, and
organizations. On–line dictionary Economics
About
FDI is money from one country that is put
into businesses in another country. Business
English Dictionary

The major similarities are: a) FDI and FPI remain primarily determined by economic factors, b) FDI and FPI assume ownership of major financial resources; c) the direct investor (DI) and the portfolio investor (PI) assume particular risks; d) FDI and FPI have the same objective, that of achieving a profit; e) FDI and FPI generate flows of foreign investment. The differences are numerous and substantial: a) DI buys control and exertion of management of the investment, and has managerial skills, while PI buys securities; b) DI targets a return on long-term, while PI...
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