Causality relationship between foreign direct investments and economic improvement for developing economies: Russia case study

Abstract

Foreign direct investment (FDI) can have a significant impact on economic development in developing economies like Russia. FDI can bring in capital, technology, and management expertise that can stimulate economic growth, increase employment, and improve productivity. In the case of Russia, FDI has played a vital role in the country’s economic development. A study conducted by the World Bank in 2019 found that FDI inflows have contributed significantly to Russia’s economic growth and led to increased productivity, employment, and exports. The article analyzes the relationship between foreign direct investment and economic growth in Russia using ARDL cointegration and Toda-Yamamoto causality analysis test. The results reveal that there is no causality relation between GDP growth and foreign direct investment inflow in Russia. Overall, foreign direct investment effectively contributes to economic growth in Russia in the short term and not really in the long run.