Foreign Direct Investment and Economic Growth in Latvia

FDI into transition economies theoretically may facilitate growth, promote technical innovation, and accelerate enterprise restructuring. All of these potential benefits of FDI are important but there is no evidence that positive externalities generated by foreign presence in Latvia actually exist. The exact nature of relationship between FDI and their host economies vary between economic sectors. Further, the effects of economic and other variables rarely are instantaneous; it takes some time for consumers, producers and other economic agents to respond. So the econometric models using time series data are often formulated with lags in behaviour. The econometric model of investment behaviour is applied to quarterly data starting with the year 2000.