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The Determinants of FDI Flows from the EU-15 to the Visegrad Group Countries – A Panel Gravity Model Approach

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  • Liwiusz Wojciechowski

    (Cracow University of Economics)

Abstract

The objective of this paper is to evaluate determinants of the general FDI flow to Visegrad countries and the effect of participation in EMU and EU. It was decided to investigate how augmented Gravity Model of trade allows identifying and evaluating the significance of pull and push factors of FDI. In an empirical analysis of panel data Hausman-Taylor estimator was used because of the time-invariant variables presence. While investment decisions regarding the choice of country are determined by the size of the target market, the distance is still a negative factor in creation of FDI volume. Additionally, it was proven that membership in EMU, differences in taxation, historical background, access to the sea and prices stability have significant impact of FDI stock formation in each country belonging to V4. Is was also noted that Poland became a leader of the V4 as well as EU-12 FDI market sourcing from the old EU Member States. It is necessary to develop an “FDI attracting mechanism” using existing resources. Business regulations and taxation policy as well as main macroeconomic variables which are responsible for the economy standing are also examined as attracting the FDI flow. The originality of this work lies in studying some aspects of FDI inflow into the group of both similar and different countries in economic measures terms.

Suggested Citation

  • Liwiusz Wojciechowski, 2013. "The Determinants of FDI Flows from the EU-15 to the Visegrad Group Countries – A Panel Gravity Model Approach," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(1), pages 7-22.
    • Handle: RePEc:krk:eberjl:v:1:y:2013:i:1:p:7-22
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    References listed on IDEAS

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    1. Portes, Richard & Rey, Helene, 2005. "The determinants of cross-border equity flows," Journal of International Economics, Elsevier, vol. 65(2), pages 269-296, March.
    2. Paulo Júlio & Ricardo Pinheiro–Alves & José Tavares, 2013. "Foreign direct investment and institutional reform: evidence and an application to Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(3), pages 215-250, December.
    3. Paas, Tiiu & Tafenau, Egle, 2005. "European trade integration in the Baltic Sea Region - A gravity model based analysis," HWWA Discussion Papers 331, Hamburg Institute of International Economics (HWWA).
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    Cited by:

    1. Paul J. J. Welfens & Fabian J. Baier, 2018. "BREXIT and Foreign Direct Investment: Key Issues and New Empirical Findings," IJFS, MDPI, vol. 6(2), pages 1-21, April.
    2. Gergő Tömöri & Vilmos Lakatos & Bernadett Béresné Mártha, 2021. "The Effect of Financial Risk Taking on Profitability in the Pharmaceutical Industry," Economies, MDPI, vol. 9(4), pages 1-14, October.
    3. Veronika Fenyves & Balazs Nyul & Krisztina Dajnoki & Zoltan Bacs & Gergo Tomori, 2019. "Profitability of Pharmaceutical Companies in the Visegrád Countries," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(4), pages 99-111.
    4. Krzysztof Wach, 2014. "Editorial: FDI in Central Europe," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 2(3), pages 5-6.

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    More about this item

    Keywords

    Visegrad countries (V4); FDI; gravity theory; panel;
    All these keywords.

    JEL classification:

    • 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

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