This study examines the impact of foreign direct investment (FDI) on economic growth over the period 2000–2022, focusing on Albania as a case of a transition economy integrating into the global market. Using annual data and employing time series econometric techniques, including the vector error correction model (VECM), the paper explores both the short-run and long-run dynamics between FDI and gross domestic product (GDP) per capita. The findings reveal that FDI has a statistically significant and positive impact on long-term economic growth, while the contribution of domestic investment, though positive, is comparatively limited. This research contributes to existing literature by offering updated empirical evidence over a two-decade period marked by economic liberalization and European integration efforts, an area previously underexplored in transition economies. Additionally, the study highlights the importance of sectoral FDI inflows, particularly in energy and tourism, and their strategic role in shaping sustainable economic growth. By identifying FDI as a more potent driver of growth than domestic investment, the study offers practical insights for policymakers aiming to improve the investment climate and attract quality foreign capital. These findings provide a meaningful contribution to both regional and broader discussions on the role of FDI in sustainable development.
Muharremi et al. (Wed,) studied this question.