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Determinants of foreign direct investment flows in the Eurasian Economic Union under conditions of global economic fragmentation

Author

Listed:
  • Sergej A. Perekhod

  • Alik G. Babaev

Abstract

The article analyzes the impact of global economic fragmentation and sanctions pressure on foreign direct investment (FDI) flows in the countries of Eurasian Economic Union (EAEU). The purpose of the study is to identify the key determinants of FDI inflows and outflows and to assess their dynamics under economic fragmentation and external restrictions. The relevance is determined by the insufficient inflow of FDI and the predominance of capital outflows, which limited sustainable development in the EAEU. The novelty of the research consists in the simultaneous econometric assessment of both inflows and outflows of FDI in the region over the period of 2010–2022, taking into account institutional, macroeconomic, and financial factors. The study is based on a panel dataset for five EAEU countries, with econometric analysis using Pooled OLS, Fixed Effects, and Random Effects models. The findings indicate that economic growth stimulates FDI inflows, while high wages reduce investment attractiveness. An inverse relationship of outflows and labor productivity was revealed. The Random effects model best explains inflows, while Fixed effects model more accurately capture the outflows. The dynamics of FDI in the EAEU are determined by market size, macroeconomic stability, and labor costs. To increase resilience to external shocks and enhance investment attractiveness the study recommends strengthening financial integration within the EAEU, expanding cooperation with Asian partners, and introducing digital currencies.

Suggested Citation

  • Sergej A. Perekhod & Alik G. Babaev, 2026. "Determinants of foreign direct investment flows in the Eurasian Economic Union under conditions of global economic fragmentation," Economics of Contemporary Russia, Regional Public Organization for Assistance to the Development of Institutions of the Department of Economics of the Russian Academy of Sciences, vol. 29(1).
    • Handle: RePEc:ack:journl:y:2026:id:1138
    DOI: 10.33293/1609-1442-2026-29(1)-73-88
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    References listed on IDEAS

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