Investment Determinants of Economic Growth: World Experience and Ukraine

Abstract

Welfare of the population and investment are known to be drivers of economic growth. The paper explores the concept of economic growth and the development of determinants of this economic phenomenon. Since the beginning of the 20th century, economic models based on the premise that investment factors lead to the growth of a nation have been widely used. Since GDP is a quantitative indicator that allows making conclusions about a country’s economic growth, this paper studies GDP dynamics in Ukraine, compared to other regions, and identifies its link with the FDI. The article analyzes the dynamics of direct foreign investments on regional and global scales, and compares them with trends in world gross product changes, which is a direct expression of a region’s growth status. To test our hypothesis on the interrelation between GDP and macroeconomic indicators such as FDI, inflation index, and discount rate, we conducted panel studies using data from Ukraine, Georgia, Serbia, and Romania. The findings suggest that foreign direct investments constitute one of the sources of a country’s GDP growth and, therefore, it can be considered an important determinant of a country’s economic development.