The efficiency of foreign borrowing: the case of Poland

The main objective of this paper is to examine the efficiency of foreign investment borrowing by Poland in the 1970s. That decade was of particular significance in the post-war history of Central and Eastern Europe. For the first time after the World War II, Poland - a major country in the socialist block - opened up to western economies by increasing foreign trade and by taking loans to finance the imports of modern technology and investments. Since there has been a major disagreement about the economic impact of the loans, we make an attempt to resolve this controversy. The considerations are conducted in a macroeconomic model. Based on the econometric analysis, we conclude that the efficiency of foreign investment borrowing was relatively high. It means that the policy of using external sources to finance economic growth was fully justified. (C) 2012 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of the Organising Committee of ICOAE 2012