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Patterns of Foreign Direct Investment in the New EU Countries

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Author Info

  • Sova, Robert

    (Academy of Economic Studies, Bucharest)

  • Albu, Lucian Liviu

    ()
    (Institute for Economic Forecasting, Romanian Academy)

  • Stanciu, Ion

    (Academy of Economic Studies, Bucharest)

  • Sova, Anamaria

    (CES, Sorbonne University, Paris)

Abstract

The aim of the paper is to assess the determinants of foreign direct investment (FDI) inflow for the recent members of the EU (CEEC-41) using panel data methods. Our analysis is important because FDI is considered as a main contributor to economic development, modernization, income growth, catching-up process and changes in specialization structure. In this paper, we adopt a rigorous econometric model to explain the FDI inflows. We examine the role played by economic and non-economic factors in FDI attractiveness. Using the gravity model and recent econometric techniques, we obtain the unbiased and convergent estimators. From an econometric point of view, the use of a Fixed Effect Vector Decomposition (FEVD) estimator for the gravity model appears to be convenient for our data sample.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 6 (2009)
Issue (Month): 2 (June)
Pages: 42-51

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Handle: RePEc:rjr:romjef:v:6:y:2009:i:2:p:42-51

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Related research

Keywords: gravity models; panel data models; FDI; CEE countries;

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References

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  1. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
  2. Bos,J.W.B. & Laar,M.,van de, 2004. "Explaining Foreign Direct Investment in Central and Eastern Europe: an Extended Gravitiy Approach," Research Memorandum 041, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  4. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  5. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Christophe Rault & Robert Sova & Ana Maria Sova, 2008. "Modeling International Trade Flows between CEEC and OECD Countries," CESifo Working Paper Series 2282, CESifo Group Munich.
  7. Peter Egger & Michael Pfaffernmayr, 2002. "The Pure Effects of European Integration on Intra-EU Core and Periphery Trade," International Trade 0204001, EconWPA.
  8. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  9. Albu, Lucian Liviu, 2008. "Trends in Structural Changes and Convergence in EU," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 91-101, March.
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Cited by:
  1. Andrei, Dalina Maria, 2012. "Foreign Direct Investments in Romania. A Structural and Dynamic View," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 129-146, December.

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