Reflection of Foreign Investments and Foreign Trade in Romania

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Summary

Foreign direct investment (FDI) plays a critical role in shaping a country's trade performance by enabling multinational enterprises to access new markets and expand production and distribution networks. The purpose of this study is to investigate the impact of foreign investment inflows on foreign trade in Romania over the period 2003–2022, using annual time-series data. Following stationarity tests, the Granger causality approach was applied to determine the direction of causality between the variables. The empirical findings reveal a unidirectional causal relationship running from FDI to foreign trade, indicating that FDI inflows significantly stimulate Romania's trade volume, while the reverse relationship is not statistically supported. These results suggest that policies aimed at attracting foreign investment can serve as an effective tool for enhancing Romania's trade performance and integration into global markets.