Relationship between FDI Inflow and Unemployment Rate in the Case of the Former Yugoslav Republics

Abstract

Foreign Direct Investments - FDIs are recognized in the economics literature as one of the vital determinants of economic growth. A particular interest of any host economy is to reach the employment effect of the FDIs. The purpose of the paper is to analyze the relationship between the inflow of the FDIs and the unemployment rate in the case of the former Yugoslav republics and to identify whether and how the new economies have benefited from the FDI inflow. The paper develops a model identifying the FDI as a determinant of the unemployment rate. A regression analysis is used to examine the correlation between the FDI inflow and the unemployment rate over the period of 30 years. The results show differences in FDIs inflow and huge individual variations in the unemployment rate in each country.