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Fdi Drivers In Central Europe, The Baltics, And The Western Balkans: The Role Of Macroeconomic And Institutional Factors

Author

Listed:
  • Neshat Podvorica

    (University of Prishtina “Hasan Prishtina”, Faculty of Economics)

  • Avdullah Hoti

    (University of Prishtina “Hasan Prishtina”, Faculty of Economics)

  • Petrit Gashi

    (University of Prishtina “Hasan Prishtina”, Faculty of Economics)

Abstract

This paper investigates the role of the business environment on the inflow of foreign direct investments across Central Europe, the Baltics, and Western Balkan countries. It places particular emphasis on the macroeconomic framework and institutional quality of the countries in focus. The paper employs the two-step GMM method on a panel data over the period 2002-2022. Initially, the results suggest a path dependency in FDI inflows. Further, FDI inflows increase with economic growth, trade openness, and price stability. There is no evidence of a statistically significant relationship between FDI inflows and institutional variables. Broadly, findings indicate that, in order to promote foreign investment, governments should prioritize a stable macroeconomic environment, including price stability, as well ensuring a proper integration into the global market. Further research is needed to examine the role of institutional setting in FDI inflows.

Suggested Citation

  • Neshat Podvorica & Avdullah Hoti & Petrit Gashi, 2025. "Fdi Drivers In Central Europe, The Baltics, And The Western Balkans: The Role Of Macroeconomic And Institutional Factors," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 34(1), pages 65-84, june.
    • Handle: RePEc:avo:emipdu:v:34:y:2025:i:1:p:65-84
    DOI: 10.17818/EMIP/2025/15
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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