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Assessing the impact of fiscal transparency on FDI inflows

Author

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  • Cicatiello, Lorenzo
  • De Simone, Elina
  • Ercolano, Salvatore
  • Gaeta, Giuseppe Lucio

Abstract

This paper analyzes the role of fiscal transparency as a determinant of foreign direct investment (FDI) attractiveness. It proposes an empirical test based on a panel regression analysis on data from 72 countries in the 2006–2015 time span. The evidence supports the idea that countries characterized by higher levels of budget openness attract more FDI inflows. In more detail, a higher degree of transparency during the phase of budget execution is associated with increases of FDI inflows, even when the sample is restricted to non-OECD countries and low and lower-middle-income countries. The positive effect is robust to several different specifications and is found to be additional to the one of general government transparency. Moreover, we also show that the role played by fiscal transparency in attracting FDI is independent of other close institutional determinants like control of corruption and regulatory quality.

Suggested Citation

  • Cicatiello, Lorenzo & De Simone, Elina & Ercolano, Salvatore & Gaeta, Giuseppe Lucio, 2021. "Assessing the impact of fiscal transparency on FDI inflows," Socio-Economic Planning Sciences, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:soceps:v:73:y:2021:i:c:s0038012119305142
    DOI: 10.1016/j.seps.2020.100892
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    2. Alvaro Cuervo-Cazurra & Bernardo Silva-Rêgo & Ariane Figueira, 2022. "Financial and fiscal incentives and inward foreign direct investment: When quality institutions substitute incentives," Journal of International Business Policy, Palgrave Macmillan, vol. 5(4), pages 417-443, December.
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    7. Cristian MIRICA & Angela Eliza MICU & Valentin Marian ANTOHI & Monica Laura ZLATI, 2022. "Approaches to the Determination of the Underground Economy Component by Methods of Budget Execution Management Through Statistical Analysis in Romania," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 171-176.

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