This paper investigates the relationship between foreign direct investment and economic growth for five countries in transitional economies. Despite the common view positive effectiveness of the foreign direct investment on the growth rate of the country in the related literature, we find that there is no relationship between foreign direct investment and growth rate of these economies. We propose that there are some mechanisms specific to such economies causing a vacuous relationship between foreign direct invetment and growth. The Granger and Sims Causality tests and some Correlation Parameters are used to investigate the existence of these mechanisms. Economic intuition of the results suggest that foreign direct investment can only affect growth rate positively as long as countries develop their independent economic structure.
Key words: Foreign Direct Investment, Economic Growth, Independent Economic Structure, Granger Causality, Sims Causality Article Language: EnglishTurkish
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