The Impact of Foreign Capital on the Country Economy

Abstract

An influence effect of penetration of foreign direct investments (FDI) is not clear for economy of a home country. There are quantitative and qualitative indicators measuring the role of foreign direct investments: macro economical indicator characterizes an ability of a country to attract FDI; and micro economical indicator characterizes how transnational the country is. The effects for countries exporters and importers of capital are being discovered through the effects of issues (employment, competition), surplus and rent payments. To measure out the investment effect is possible within portfolio theory.
It is offered to modify the criteria accepted for factories to measure out macro economical effectiveness of foreign investment. Figuring out the macro economical effects assumes an analysis of foreign capital inflow on the size of GDP, level of export / import and employment. Due to help of Pierson’s correlation coefficient it was found out that there is a connection between these indicators without a temporal log at first and then with a temporal log in Russia, Hungary and China.
We chose Hungary as it was the first country of Eastern Europe to attract the foreign capital; China as a country attracting the largest volume of FDI among the emerging markets countries. On a base of statistical materials of central banks in Russia, Hungary and China tables arranged and graphs were imaged. They help to make a conclusion that the inflow of foreign capital in home country is not absolutely positive. It leads to another conclusion: the national investors must be stimulated.
Keywords: foreign direct investments; home countries; investment policy; correlation coefficient; effect valuation; temporal log