Econometric Analysis: Foreign Direct Investment, Money Supply, Exchange Rate, Monetary Policy Interest Rate, Inflation Rate and GDP Essay

In order to pursue an econometric analysis the authors has previously built a database for the period 2003 - 2013, concerning statistical information on the flow of foreign direct investment, money supply, exchange rate, monetary policy interest rate, inflation rate and GDP.
- Foreign Direct Investment (FDI) are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors. (IMF 2009).
- Money Supply (MSP) is the category M3 of the money supply that includes M2 as well as all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. This is the broadest measure of money (the broadest monetary aggregate) and it is used by economists to estimate the entire supply of money within an economy.
- Exchange Rate (EXR) is the price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. Exchange rates included in the list of the average market exchange rates are nominal and are based on the quotation of the banks licensed to perform foreign exchange transactions. The calculus is based on the change in the nominal exchange rate to assess the effects on FDI flows. The exchange rate is expressed against euro as the main currency for trade and investment in Romania.
- Monetary Policy Interest Rate (MPR) is the interest rate used for the main open market operations of the central bank. Currently, these are the repos within a week performed by fixed rate tender.
- Inflation Rate (IFL) is defined by economists to be a general rise in the price level that is measured using an index. Some economists use the gross domestic product deflator, or the GDP deflator, to measure inflation, but the measurement of inflation in the European Union is the Consumer Price Index (CPI). The CPI measures the price of a basket of goods that a typical consumer purchases. There are a large number of studies that find a positive impact of a low inflation environment on FDI inflows.
- Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. As mentioned above, there can also be feedback effects from FDI (both current and past) on economic growth in return.