The Impact of Country Risk Ratings and of the Status of EU Integration on FDI Inflows in CESEE Countries
We analyze the determinants of foreign direct investment (FDI) inflows in the ten EU Member States, plus Croatia, in Central, Eastern and Southeastern Europe (CESEE) over the period from 1995 to 2011, with a particular focus on the effects of country risk ratings and the EU integration status on a country’s attractiveness for FDI. We distinguish between twelve different risk ratings and seven stages of integration (non-EU country, potential candidate country, candidate country, negotiating country, EU Member State, ERM II member country and euro area country). Using quarterly data, we identify the market size and cost factors as the most important determinants, suggesting that market- and efficiency-seeking FDI were the most prevalent forms of FDI in the region. The host country’s infrastructural environment also has the expected positive effect on FDI inflows. The effects of risk ratings turn out to be nonlinear in the sense that improvements in intermediate risk levels have the largest positive effect on FDI, while this effect diminishes in the case of upgrades at the highest levels. Turning to the status of EU integration, a more advanced stage represents an additional bonus over pure cost- and market-related factors, but only up to the onset of the global financial and economic crisis.
Volume (Year): (2012)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: |
Phone: +43/1/404 20 7405
Fax: +43/1/404 20 7499
Web page: http://www.oenb.at
More information through EDIRC
|Order Information:|| Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Bellak & Rajneesh Narula, 2008.
"EU enlargement and consequences for FDI assisted industrial development,"
Economics & Management Discussion Papers
em-dp2008-69, Henley Business School, Reading University.
- Narula, Rajneesh & Bellak, Christian, 2008. "EU enlargement and consequences for FDI assisted industrial development," MERIT Working Papers 067, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Brada, Josef C. & Kutan, Ali M. & Yigit, Taner M., 2003. "The effects of transition and political instability on foreign direct investment: Central Europe and the Balkans," ZEI Working Papers B 28-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Hefeker, Carsten & Busse, Matthias, 2005.
"Political Risk, Institutions and Foreign Direct Investment,"
HWWA Discussion Papers
315, Hamburg Institute of International Economics (HWWA).
- Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
- Carstensen, Kai & Toubal, Farid, 2004.
"Foreign direct investment in Central and Eastern European countries: A dynamic panel analysis,"
Munich Reprints in Economics
19965, University of Munich, Department of Economics.
- Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
- Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy.
- Fritz Breuss & Peter Egger & Michael Pfaffermayr, .
"The Impact of Agenda 2000's Structural Policy Reform on FDI in the EU,"
WIFO Working Papers
- Breuss, Fritz & Egger, Peter & Pfaffermayr, Michael, 2001. "The impact of Agenda 2000's structural policy reform on FDI in the EU," Journal of Policy Modeling, Elsevier, vol. 23(7), pages 807-820, October.
- Bevan, Alan & Estrin, Saul, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," CEPR Discussion Papers 2638, C.E.P.R. Discussion Papers.
- Laura Resmini, 1999.
"The Determinants of Foreign Direct Investment into the CEECs: New Evidence from Sectoral Patterns,"
LICOS Discussion Papers
8399, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Laura Resmini, 2000. "The Determinants of Foreign Direct Investment in the CEECs: New evidence from sectoral patterns," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 665-689, November.
- Alan A. Bevan & Saul Estrin, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," William Davidson Institute Working Papers Series 342, William Davidson Institute at the University of Michigan.
- Jarko Fidrmuc & Reiner Martin, 2011. "FDI, Trade and Growth in CESEE Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 70-89.
- Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
- Peter Nunnenkamp, 2002. "Die Auswirkungen der EU-Osterweiterung auf die Direktinvestitionen und deren Rückwirkungen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 55(11), pages 13-19, 06.
- Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
- Vladimir Kuhl Teles & Maria Carolina Leme, 2010. "Fundamentals or market sentiment: what causes country risk?," Applied Economics, Taylor & Francis Journals, vol. 42(20), pages 2577-2585.
- Mintz, Jack M. & Weichenrieder, Alfons J., 2010. "The Indirect Side of Direct Investment: Multinational Company Finance and Taxation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014491, June.
- Peter Backé & Sonsoles Gallego & Sándor Gardó & Reiner Martin & Luis Molina & José Maria Serena, 2010. "How Did the Global Financial Crisis Affect the CESEE Region and Latin America? – A Comparative Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 49-66.
When requesting a correction, please mention this item's handle: RePEc:onb:oenbfi:y:2012:i:3:b:1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Birgit Riedler)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.