Causal Links between Trade Openness and Foreign Direct Investment in Romania

In this increasingly globalized era, foreign direct investments are considered to be one of the most important sources external financing for all countries. This paper investigates causal relationship between trade openness and investment (FDI) inflows in Romania during period 1997–2019. Throughout study, Trade Openness is main independent variable, Gross Domestic Product (GDP), Real Effective Exchange Rate (EXR), Inflation (INF), Education (EDU) act as control variables investigating relationships (TOP) FDI inflow Romania. The Auto Regressive Distributed Lag (ARDL) Bounds test procedure was adopted achieve above-mentioned objective. has negative statistically significant long-run short-run with throughout period. negatively affects inflow, which suggest that higher level is, less likely it will attracted long run. result Granger causality indicated a unidirectional FDI. It also showed direction ran from openness.