THE IMPACTS OF FDI ON PRODUCTIVITY AND ECONOMIC GROWTH OF UZBEKISTAN: A SOLOW MODEL ANALSYS

Abstract

This study explores how foreign direct investment (FDI) influences productivity and economic growth by comparing two groups of countries: "developing" and "developed." The research uses the Solow model to analyze these effects. The results reveal long-term relationships between FDI and both productivity and economic growth. Key findings indicate that FDI positively impacts labor productivity and economic growth, though the strength of these effects varies between developing and developed countries. The results show that FDI positively influences economic growth both in the short term and long term. The error correction term of 0.67 indicates that any deviation in GDP from its long-term equilibrium is corrected at a rate of 67% per year. Based on these findings, the paper recommends increasing FDI flows and suggests that the government should create a more favorable environment for foreign investors. This could be achieved by managing the money supply effectively and channeling remittances into productive sectors, ultimately boosting economic growth.