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The Effects of Transition and Political Instability On Foreign Direct Investment Inflows: Central Europe and the Balkans

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  • Josef C. Brada

    ()

  • Ali M. Kutan
  • Taner M. Yigit

Abstract

This paper examines the effect of transition and of political instability on FDI flows to the transition economies of Central Europe, the Baltics and the Balkans. We find that FDI to transition economies unaffected by conflict and political instability exceed those that would be expected for comparable West European countries. Success with stabilization and reform tends to increase FDI inflows. In the case of Balkan counties, conflict and instability have reduced FDI inflows below what one would expect for comparable West European countries, and reform and stabilization failures have further reduced FDI to the region. Thus the economic costs of instability in the Balkans have been quite high.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp729.

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Length: pages
Date of creation: 01 Nov 2004
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Handle: RePEc:wdi:papers:2004-729

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Keywords: foreign direct investment; transition; political instability; political risk;

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Citations

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Cited by:
  1. Saul Estrin & Milica Uvalic, 2013. "Foreign direct investment into transition economies: Are the Balkans different?," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 4, London School of Economics / European Institute.
  2. Ugur Karakaplan & Bilin Neyapti & Selin Sayek, 2005. "Aid and Foreign Direct Investment: International Evidence," Working Papers 2005/12, Turkish Economic Association.
  3. Malgorzata Jakubiak & Alina Kudina, 2008. "The Motives and Impediments to FDI in the CIS," CASE Network Studies and Analyses 0370, CASE-Center for Social and Economic Research.
  4. Mulaj, Isa, 2009. "Tax reform in emerging transition: Is Kosovo’s Government and NGOs mathematical economics rational?," MPRA Paper 12642, University Library of Munich, Germany.
  5. Stoian, Carmen & Filippaios, Fragkiskos, 2008. "Dunning's eclectic paradigm: A holistic, yet context specific framework for analysing the determinants of outward FDI: Evidence from international Greek investments," International Business Review, Elsevier, vol. 17(3), pages 349-367, June.

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