The impact of Foreign Direct Investment on Trade Flows in Europe and the Union of Armenia

Mohsen Heydari

Abstract


Foreign investment and other tools of supplying foreign financial resources in developing countries are increasing day by day as one of the development leverages. This plays a basic role in reinforcing competitive power of these countries. Using financial facilities of banks and international financial institutions and supranational foreign investment services provide the possibility to increase capital resources and equipments of a country for growth and development in addition to provide technological needs and one part of financial needs of investors and internal economic activists. It is noteworthy that utilizing international financial and credit facilities in the investee country doesn't show economic weakness of that country; rather it is the absorption degree of such foreign facilities as a sign of political and economical stability in the country, because foreign investors and monetary and financial firms which offer credit facilities always intend to offer their facilities to countries that are relieved about return of base and inferior of capital at date of maturity while ensuring economical and political stability. According to estimation results trade variable has a positive and totally significant impact on mutual relations of foreign direct investment in member countries of the European Unionso that inward FDI is increased about 3.58 by one percent increase of mutual trade among members.


Keywords


Foreign direct investment, trade flows, Union Europe, Armenia.  

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