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The Potential Magnitude and Impact of FDI flows to CEECs

Author

Listed:
  • Brenton, Paul

    () (Centre for European Policy Studies, CEPS)

  • Di Mauro, Francesca

    (Centre for European Policy Studies, CEPS)

Abstract

This paper uses a simple gravity model of bilateral FDI flows to assess the commonly heard assertion that FDI inflows into transition economics in Central ad Eastern Europe have been disppointingly low. The results show that the amounts of overseas investment bY EU countries in the more advanced transition economies are already greater than one would expect given their current level of income, market size and relative proximity. A flood of FDI into these countries is therefore unlikely. For the less advanced countries in the region current FDI flows are considerably below their potential level. We proceed to try and indentify some implications of overseas investment for the home country. We find that FDI and exports appear to be complementary activites. However, we also find a positive relationship between FDI and imports suggesting that relationship between trade and FDI is more complex than standard theories and aggregate data analysis can provide for.

Suggested Citation

  • Brenton, Paul & Di Mauro, Francesca, 1999. "The Potential Magnitude and Impact of FDI flows to CEECs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 59-74.
  • Handle: RePEc:ris:integr:0097
    as

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    More about this item

    Keywords

    Potential; Magnitude;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • 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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