Causality between Greenfield Investments, Regulatory Quality, and Economic growth: Is the Western Balkans different?

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Azra Branković
Sahrudin Sarajčić


The study aims to examine the causality link between Greenfield Investments, Regulatory Quality, and Economic Growth by using seven Western Balkan countries between 2003 and 2022. Johansen cointegration tests, the VECM model, and multiple empirical unit root tests are the foundation of the empirical analysis. The study's findings indicate that, in the short run, GFI-led growth in Albania and North Macedonia is supported. In the long run, the analysis backs the growth driven by GFI in Serbia and Montenegro and the growth driven by regulatory quality in Albania, Bosnia and Herzegovina, North Macedonia, Serbia, Montenegro, and Bulgaria. The findings support the growth driven by regulatory quality in most Western Balkan countries, reassuring national policymakers that encouraging improvements in regulatory quality and GFI inflows is warranted and will ultimately spur economic growth.

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