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Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis

Author

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  • Miroslav Mateev

    (University of Maine Business School, Orono, ME, United States)

  • Iliya Tsekov

    (American University in Bulgaria, Blagoevgrad, Bulgaria)

Abstract

This paper examines the major determinants of foreign direct investment (FDI) inflows in 26 European Union (EU) countries using panel data. Our empirical study takes a different approach by separating European countries into two groups: Western (EU-15) countries and Central and Eastern European (CEE) countries. The results from the panel data analysis of FDI inflows to 26 EU countries for the period 1994-2012 show that: (1) traditional location variables such as market size, trade openness, unemployment, infrastructure, tax rate and unit labour costs are able, to a large extent, to explain FDI flows to both groups of countries; (2) there are country-specific factors such as economic growth, unit labour costs and credit risk that contribute to the differences in FDI patterns across EU-15 and CEECs; and (3) policy and institutional quality factors are found to play an important role for both groups of countries. When analyzing host countries based on their relative level of performance, we find that the top ten FDI performers are able to attract a significant amount of FDI because of their macroeconomic stability and high level of institutional development, while for EU countries with low FDI dominance, policy and institutional risk factors play a more important role.

Suggested Citation

  • Miroslav Mateev & Iliya Tsekov, 2014. "Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis," Financial Theory and Practice, Institute of Public Finance, vol. 38(3), pages 337-374.
  • Handle: RePEc:ipf:finteo:v:38:y:2014:i:3:p:337-374
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    1. Dellis, Konstantinos & Sondermann, David & Vansteenkiste, Isabel, 2022. "Drivers of genuine FDI inflows in advanced economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 407-419.

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    More about this item

    Keywords

    foreign direct investment; transition economy; gravity model; institutional quality;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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

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