COMPETITIVENESS AND ECONOMIC POLICIES RELATED TO FOREIGN DIRECT INVESTMENT

Foreign direct investment may improve productivity through technology transfer on the one hand, and it may also have other positive external effects through corporate linkages (e.g. market access, or improved terms of financing) on the other hand, thus promoting economic growth. These beneficial effects are not automatic, though. Until the mid-nineties Hungary had played a leading role within the region in attracting investments. After 1999, however, the country started accumulating increasing competitive disadvantages as compared to its competitors. Even though stock data adjusted for reinvested profits show less of a lag, the post-1999 figures still indicate a...