In this study, we investigate the dynamic relationship between Foreign Direct Investment (FDI) and economic growth in Albania using a Vector Autoregression (VAR) framework and Granger-causality analysis. Covering annual data from 1992 to 2022, the findings reveal a bidirectional link between FDI and GDP growth, suggesting that economic expansion not only attracts foreign investment but is also reinforced by it. The results highlight the importance of sustained economic growth in fostering FDI inflows, offering critical insights for policymakers seeking to enhance Albania’s investment climate. Additionally, this research enriches the broader discourse on FDI-growth dynamics, providing relevant implications for emerging economies with similar structural characteristics.
Kladiola Gjini (2024) studied this question.