The Influence of Foreign Direct Investmenton the Inflation Rate in Romania: A VAR Approach

This study examines the relationship between inflation and foreign direct investment (FDI) flows in Romania, based on international standards from BPM6 and OECD BD4.Using quarterly data from Q1 2013 to Q1 2025, sourced from the National Bank of Romania and the National Institute of Statistics, the paper analyzes the relationship between inflation and foreign direct investment flows in Romania, focusing on both inward FDI (by non-residents) and outward FDI (by Romanian residents).To capture the dynamic relationships between these flows and the inflation rate, a Vector Autoregressive (VAR) model was applied.This approach allows for the identification of short-term lagged effects and reciprocal influences between capital movements and price developments.The results reveal significant impacts of FDI flows on inflation rates, highlighting how foreign capital influences monetary policy and price stability in an emerging economy.These empirical findings support the formulation of policies aimed at attracting sustainable investment.