Foreign direct investment, domestic savings and economic growth: The case of Russian federation

ABSTRACT: The paper empirically investigates the relationship between real income, domestic savings and foreign direct investment in the case of Russian Federation using quarterly data covering the period 1989-2011. The correlations between variables are statistically proven by applying multiple regression analysis and the Johansen co-integration test reveals that there exist a long-run relationship between real income and domestic savings. Granger causality tests confirm that real income in Russia is FDI driven. Hence, real income is affected by foreign investment and domestic savings, one of the recommendations would be to ease the procedures of doing business in Russian Federation in order to attract foreign investors and develop investment climate in the country. Keywords: Foreign Direct Investment, Gross Domestic Product, Domestic Savings, Johansen co-integration, Granger-Causality, Russia. …………………………………………………………………………………………………………………………