THE IMPACT OF JAPANESE FIRMS ON THE ROMANIAN ECONOMY

During the last decade, the economic relationship between Romania and Japan has increased significantly due to the existence of an Economic Partnership Agreement between the European Union and Japan. Recently, it was confirmed that certain Japanese investments will be made in the Romanian economy, mostly through the financial implication of listed firms on the Japanese stock exchange market. The main aim of this paper is to analyse the historical data and future impact of Japanese foreign direct investments (FDI) on the Romanian macroeconomic stability indicators. The foreign direct investments represent the amount of cross-border direct investments between firms residing in different countries, for example Romania and Japan. Direct investments usually refer to acquired equities, which allow control and ownership for more than 10% of an enterprise. The proposed macroeconomic stability indicators consist of real GDP, inflation rate, government deficit, government debt, exchange rates, long-term interest rate and unemployment rate. The empirical analysis and the results are estimated using econometric methodologies and techniques that include estimations of VEC models or VECM (Vector Error Correction Model), which are basically restricted vector autoregression models (VAR) that test the existence of cointegrated time series. By using VECM, the influence of foreign direct investments can be determined through causal relations between the aforementioned variable and other relevant macroeconomic variables. Based on past results mentioned in the international economic literature, these relations can be either unidirectional, bidirectional or non-existent. For this study, quarterly data, during the period 2005-2016, has been extracted from national and international databases, such as Eurostat, UNCTAD and NBR (National Bank of Romania). Based on the obtained results, only two econometric variables, the euro-national currency exchange rate and public debt, have a bidirectional causal relation with FDI.