Scientific Papers


© CSR, 2008-2019
ISSN: 2306-3483 (Online), 2071-8330 (Print)

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Foreign direct investment and shadow economy: One-way effect or multiple-way causality?

Vol. 15, No 4, 2022


Inna Tiutiunyk


Department of Finance Technology and Entrepreneurship, 

Sumy State University, Ukraine

ORCID 0000-0001-5883-2940

Foreign direct investment and shadow economy: One-way effect or multiple-way causality?

Wojciech Cieśliński


Wojciech Cieśliński

Department of Communication and Management, 

Wroclaw University of Health and Sport Sciences, 

Wroclaw, Poland 

ORCID 0000-0001-8226-607X

Andrii Zolkover


Department of Finance and Business Consulting, 

Kyiv National University of Technologies and Design,


ORCID 0000-0002-8176-1850


László Vasa


Széchenyi István University,

Győr, Hungary

ORCID 0000-0002-3805-0244


Abstract. The article examines the relationship between the size of the shadow economy and indicators of the investment market development. Net inflow of foreign direct investments, volume of net investments in non-financial assets, volumes of portfolio investments, and net outflow of foreign direct investment were used as parameters characterizing the development of the investment market. The dependence between the indicators was analyzed using the regression equation, Shapiro-Wilk test. Research results demonstrate that the increase in the inflow and outflow of foreign direct investments leads to an increase in the size of the shadow economy without a time lag in Ukraine, Poland, Slovenia, Romania, Croatia, Lithuania, Latvia, Estonia, and with a time lag of 1 year in Slovakia and Hungary. The largest impact on the size of the shadow economy is made by the volume of inflow and outflow of direct foreign investments, while the volume of portfolio investments has a less significant effect. Consequently, it was concluded that the processes of inflow and outflow of direct foreign investments require enhanced control by specialized state executive bodies given the scale of their potential destabilizing impact on the macroeconomic stability of the country.


Received: December, 2021

1st Revision: September, 2022

Accepted: December, 2022


DOI: 10.14254/2071-8330.2022/15-4/12


JEL ClassificationF21, O17, O11, O17

Keywordsforeign direct investment, shadow economy, investment potential, economic development, investment channel