Foreign Direct Investment (FDI) or Remittances? Which Contributes the Most to the Albanian Economy?

Abstract

Foreign direct investment (FDI) and remittances entering an economy often play a very important role in the development and growth of economies year after year. Especially for economies with similar typolo­gies and characteristics like that of Albania, both of these elements promote economic development and serve as financial incentives. This paper aims to assess the contribution of remittances and foreign direct investment in the Albanian economy in the last three decades, through a multifactorial econometric model. The model uses three endogenous variables, the val­ue of remittances, the value of a foreign direct investment and the value of gross domestic product for the time series 1992 - 2019. As it results from the analysis of the econometric model, both remittances and foreign direct in­vestment payments have a positive impact on economic growth and the value of gross domestic product. It is also evident that remittances are the ones that affect the gross domestic product more compared to foreign di­rect investment.