RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENTS AND GROSS DOMESTIC PRODUCT IN CASE OF REPUBLIC OF MACEDONIA.

Foreign direct investments play important role in the economic growth of the countries. Scientist and policy-makers almost unanimously believe that the inward foreign direct investments positively influence the economic growth indicators of the host countries such as the industrial output, employment, export and ultimately the gross domestic product. Moreover, the foreign direct investments in the developing countries have many positive externalities, like the transfer of the new technologies and industrial expertise that these countries cannot normally afford. They foster the formation of high quality local human resources and integrate these countries into the global markets with higher country competitiveness then it would be without them. All of these direct and indirect outcomes of the foreign direct investments contribute to the faster economic growth of the host countries. This paper examines the correlation between the growth of the foreign direct investments and the growth of the Gross Domestic Product in the case of the Republic of Macedonia. The main conclusion is that the relationship between these two categories is positive and statistically significant. Although the applied method does not imply existence of actual cause-effect relationship, based on its result, and supported by the findings of other foreign and domestic economists presented in the literature review, we conclude that the Country can continue with foreign direct investment friendly policies and incentives. However, the possible adverse effects of the foreign direct investments in the local economy and the fair competition, should be contained as much as it is possible. [ABSTRACT FROM AUTHOR]