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 (. 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. | Ministry of Finance WORKING PAPER No. 3 Z- MAGDOLNA SASS COMPETITIVENESS AND ECONOMIC POLICIES RELATED TO FOREIGN DIRECT INVESTMENT This paper was produced as part of the research project entitled Economic competitiveness recent trends and options for state intervention September 2003 This paper reflects the views of the author and does not represent the policies of the Ministry of Finance Author Magdolna Sass MTA Kozgazdasagi Kutatokozpont email sass@ Editors of the series Orsolya Lelkes Agota Scharle Ministry of Finance Strategic Analysis Division The Strategic Analysis Division aims to support evidence-based policy-making in priority areas of financial policy. Its three main roles are to undertake long-term research projects to make existing empirical evidence available to policy makers and to promote the application of advanced research methods in policy making. The Working Papers series serves to disseminate the results of research carried out or commissioned by the Ministry of Finance. Working Papers in the series can be downloaded from the web site of the Ministry of Finance http Dokumentumok Seo Series editors may be contacted at the pmfuzet@ e-mail address 2 Summary 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 . 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 gradual deterioration. The positive economic effects of the foreign investments .
