Foreign Direct Investment in Selected Countries of Balkan: Does it Crowd out or Crowd in Domestic Investment?

Foreign direct investments are generally considered as one of the factors with positive influence on the economic development of countries in which this investments flow. In evaluating the impact of foreign direct investment on development, however, a key question is whether foreign direct investment crowd in domestic investment, or foreign direct investment crowd out domestic investment. The aim of this paper is to examine whether foreign direct investment in selected countries of Balkan crowds in or crowds out domestic investment. For this purpose we apply theoretical model of investment that includes foreign direct investment as an exogenous variable. We proceed test it with panel data for the period 1993 – 2009 and the two subperiods 1993 – 1999 and 2000 – 2009. We found that for the time period 1993 – 2009 and the two subperiods 1993 – 1999 and 2000 – 2009 there was an evidence of crowding out effect or neutral effect in the selected countries of Balkan.