THE NEXUS BETWEEN ECONOMIC GROWTH, BANKING SECTOR DEPTH, AND FOREIGN DIRECT INVESTMENT IN SELECT CENTRAL AND EASTERN EUROPEAN COUNTRIES

Abstract

The goal of this research is to consider the influences of foreign direct investment and banking sector depth on economic growth, by analysing these factors in six Central and Eastern European countries (Bulgaria, Croatia, the Czech Republic, Hungary, Poland, and Romania) in the period between 2000 and 2018. Cointegration among the variables was confirmed using the Westerlund panel cointegration test. The outcomes of the panel autoregressive distributed lag model confirmed the positive influence of foreign direct investment and the negative impact of the banking sector depth on the economic growth in the observed countries. The results of the short-term analysis revealed the insignificant influence of the banking sector depth and the notable positive influence of foreign direct investment on economic growth.