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Patterns of Foreign Direct Investment in the New EU Countries

  • Sova, Robert

    (Academy of Economic Studies, Bucharest)

  • Albu, Lucian Liviu

    ()

    (Institute for Economic Forecasting, Romanian Academy)

  • Stanciu, Ion

    (Academy of Economic Studies, Bucharest)

  • Sova, Anamaria

    (CES, Sorbonne University, Paris)

The aim of the paper is to assess the determinants of foreign direct investment (FDI) inflow for the recent members of the EU (CEEC-41) using panel data methods. Our analysis is important because FDI is considered as a main contributor to economic development, modernization, income growth, catching-up process and changes in specialization structure. In this paper, we adopt a rigorous econometric model to explain the FDI inflows. We examine the role played by economic and non-economic factors in FDI attractiveness. Using the gravity model and recent econometric techniques, we obtain the unbiased and convergent estimators. From an econometric point of view, the use of a Fixed Effect Vector Decomposition (FEVD) estimator for the gravity model appears to be convenient for our data sample.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 6 (2009)
Issue (Month): 2 (June)
Pages: 42-51

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Handle: RePEc:rjr:romjef:v:6:y:2009:i:2:p:42-51
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  1. Christophe Rault & Robert Sova & Ana Maria Sova, 2009. "Modelling international trade flows between CEEC and OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1547-1554.
  2. Egger Peter & Pfaffermayr Michael, . "The Pure Effects of European Integration on Intra-EU Core and Periphery Trade," EcoMod2002 330800024, EcoMod.
  3. Albu, Lucian Liviu, 2008. "Trends in Structural Changes and Convergence in EU," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 91-101, March.
  4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  5. Peter Egger, . "A Note on the Proper Econometric Specification of the Gravity Equation," WIFO Working Papers 108, WIFO.
  6. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  7. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  8. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  9. Jaap Bos & Mindel van de Laar, 2004. "Explaining Foreign Direct Investment in Central and Eastern Europe: an Extended Gravity Approach," DNB Working Papers 008, Netherlands Central Bank, Research Department.
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