Foreign Direct Investment in Selected Countries of Balkan and in the Visegrad Group Countries: Does it Crowd out or Crowd in Domestic Investment?

Foreign direct investments are generally considered to he one of the factors with positive influence on the development of economy in a country they flow to. The key question in evaluating the impact of foreign direct investment on development, however, is whether foreign direct investment crowd in or crowd out the domestic investment. The aim of this paper is to examine whether foreign direct investment in the selected countries of Balkan or in the Visegrad Group Countries crowd in or crowd out the domestic investment. For this purpose we apply theoretical model of investment that incorporates foreign direct investment as an exogenous variable. Data were tested with panel regression for the period 1993 - 2009. We found out that for the time period 1993 - 2009 there was an evidence of neutral crowding out effect or the effect of crowding out domestic investments by foreign investment in the selected countries of Balkan. Crowding out effect of domestic investment by foreign direct investment in the V4 countries, and in the whole region was proved in this time period.