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Assessing Fdi Determinants In Cee Countries During And After Transition

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  • POPOVICI OANA CRISTINA

    () (Institute for Economic Forecasting, Romanian Academy, Bucharest University of Economic Studies, Bucharest, Romania)

Abstract

The aim of this paper is to identify if the drivers of inward foreign direct investments’ stocks in Central and Eastern European countries changed in the last 20 years, given two substantial economic evolutions encountered in this period: the transition process and the adhesion at the European Union. We are interested if foreign investors are attracted by the quality of institutions, the labour market or by the telecommunications infrastructure, expressed by 10 variables, in the 11 newest EU member states. Therefore, we use a fixed effects panel data approach during 1994-2013 which we apply in two stages. In the first stage, we find the variables that strongly influence FDI in each of the three groups of determinants. In the second stage, the panel data analysis is applied only for the variables previously find as significant for FDI, to which we add traditional FDI determinants, such as trade openness and GDP per capita. Also, the mentioned years are divided into two sub periods, the first representing the transition period (from 1994 until 2003) and the second one the years comprising the EU adhesion process (from 2004 until 2013). The results confirm that there are changes in FDI determinants in these countries. During 1994 to 2003, investors were mostly interested in the quality of institutions, the openness of the economies and the environments capable of growth, where the products can be sold. For the period starting with 2004, the analyzed countries are attractive mainly through their capacity of providing labour force with low costs and created resources, such as the development of the mobile networks. The results obtained are of particular importance for the public policy decision makers, as the changes in FDI determinants require the adaptation of public policies in the CEE countries in order to remain attractive for foreign investors.

Suggested Citation

  • Popovici Oana Cristina, 2015. "Assessing Fdi Determinants In Cee Countries During And After Transition," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 113-122, July.
  • Handle: RePEc:ora:journl:v:1:y:2015:i:1:p:113-122
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    References listed on IDEAS

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    1. B. Merlevede & K. Schoors, 2005. "How to Catch Foreign Fish? FDI and Privatisation in EU Accession Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/309, Ghent University, Faculty of Economics and Business Administration.
    2. 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.
    3. 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.
    4. Bevan, Alan & Estrin, Saul & Meyer, Klaus, 2004. "Foreign investment location and institutional development in transition economies," International Business Review, Elsevier, vol. 13(1), pages 43-64, February.
    5. Josef C. Brada & Ali M. Kutan & Taner M. Yigit, 2004. "The Effects of Transition and Political Instability On Foreign Direct Investment Inflows: Central Europe and the Balkans," William Davidson Institute Working Papers Series wp729, William Davidson Institute at the University of Michigan.
    6. Edward Christie, 2003. "Foreign Direct Investment in Southeast Europe," wiiw Working Papers 24, The Vienna Institute for International Economic Studies, wiiw.
    7. Popovici Oana Cristina & Calin Adrian Cantemir, 2012. "Attractiveness Of Public Policies For Fdi In Central And Eastern European Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 61-67, July.
    8. Hans-Peter Lankes & A. J. Venables, 1996. "Foreign direct investment in economic transition: the changing pattern of investments," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 331-347, October.
    9. Oana Cristina Popovici & Adrian Cantemir Călin, 2014. "FDI theories. A location-based approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(53), pages 3-24, September.
    10. Johnson, Andreas, 2006. "FDI inflows to the Transition Economies in Eastern Europe: Magnitude and Determinants," Working Paper Series in Economics and Institutions of Innovation 59, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    11. POPOVICI Oana Cristina & CALIN Adrian Cantemir, 2012. "Competitiveness As Determinant Of Foreign Direct Investments In Central And Eastern European Countries," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 0(1), pages 658-666.
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    Cited by:

    1. Oana Cristina POPOVICI, 2016. "Determinants Of Fdi In The New Eu Member States," Romanian Economic Business Review, Romanian-American University, vol. 11(2), pages 173-182, June.

    More about this item

    Keywords

    foreign direct investment; transition process; European Union membership; panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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