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Trick or Treat? The Effect of IMF Programmes on Mobilising FDI in CESEE Countries

Author

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  • Marijana Andrijic

    (Ministry of Finance, Republic of Croatia, Zagreb, Croatia)

  • Tajana Barbic

    (The Institute of Economics, Zagreb, Zagreb, Croatia)

Abstract

This paper investigates the effect of IMF programmes on foreign direct investment in the countries of Central, Eastern and South-eastern Europe. We use original dataset for 17 countries in the region in the period from 1990 to 2013. In order to address selection bias stemming from the fact that countries are not randomly assigned to participation in IMF arrangements in a given year and controlling also for the unobservable factors influencing both IMF participation and foreign investment we employ treatment effect model. The robustness of our findings was additionally assessed by fixed effects instrumental variable panel and Arellano Bond dynamic panel estimation. Irrespective of the method used and model specification, we find that IMF arrangements negatively affect foreign direct investment in the CESEE region.

Suggested Citation

  • Marijana Andrijic & Tajana Barbic, 2018. "Trick or Treat? The Effect of IMF Programmes on Mobilising FDI in CESEE Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(3), pages 245-267, July.
  • Handle: RePEc:fau:fauart:v:68:y:2018:i:3:p:245-267
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    References listed on IDEAS

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    More about this item

    Keywords

    FDI; IMF; catalytic finance; CESEE countries; treatment effect;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • G01 - Financial Economics - - General - - - Financial Crises
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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