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      Smallness of the Economy as a (Dis)advantage: The Evidence from Selected Interdependent Macroeconomic Data

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            Abstract

            Small economies are usually classified by the size of their GDP. Among the small states, which can be determined by various criteria, there are many small economies. Smallness of the economy influences the vulnerability of the state, and if it is connected with the other potentially negative factors (land-locked or island position) or reliance on a few export products, it can create vulnerable economies. Concurrently, smallness of the economy can be an advantage, since it provides better conditions for faster economic growth and makes transformations of the economy easier. This article brings a quantitative comparative study of the small economies, classified by the size of their total GDP. Sets of macroeconomic data (foreign direct investment [FDI] net inflows in current US\(and GDP in current US\); external debt and GDP) were studied, for which the correlation between the FDI and GDP was calculated (for 40 smallest economies), as was the regression analysis between the FDI net inflows (independent variable) and the gross fixed capital formation (GFCF), as well as between the FDI net inflows and the growth of external debt for the 10 smallest economies between 1981 and 2014. The results were used to describe if there is a significant connection between FDI and external debt and if it can be mathematically modeled. All the data were taken from the web pages of the World Bank. The correlation analysis for FDI and GDP for the same years was also done. The countries that were studied had the smallest 40 economies in the world in 1981 (starting year) and in 2014 (final year), regardless of their land area, population, and geographical position. To examine the influence of the smallness of economy, the 15 largest world economies were studied as control group.

            Content

            Author and article information

            Journal
            10.13169
            worlrevipoliecon
            World Review of Political Economy
            Pluto Journals
            2042891X
            20428928
            Fall 2017
            : 8
            : 3
            : 416-442
            Article
            worlrevipoliecon.8.3.0416
            10.13169/worlrevipoliecon.8.3.0416
            88c75a0c-e4dd-4766-937a-ac5d80c72aaf
            © 2017 World Association for Political Economy

            All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

            History
            Categories
            Articles

            Political economics
            small economies,vulnerability,external debt,GDP,foreign direct investment (FDI)

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