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Determinants of inward FDI in Ukraine: Does political stability matter?

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  • Cieślik Andrzej

    (Faculty of Economic Sciences, University of Warsaw, Warsaw, Poland.)

  • Gurshev Oleg

    (Faculty of Economic Sciences, University of Warsaw, Warsaw, Poland.)

Abstract

The main goal of this article is to study the determinants of foreign direct investment (FDI) in Ukraine from 2013 to 2017 that includes the years of armed conflict. We adopt the Knowledge-Capital model as our analytical framework and extend it to include the effects that account for political stability and political regime. The research hypotheses obtained from this framework are verified using the Pseudo-Poisson Maximum Likelihood estimation technique and the bilateral panel data on direct investment stocks from 140 partner countries. Our empirical findings show that access to Ukraine's cheap labor force is the primary reason for inward FDI. Moreover, we find no direct relationship between the political events in Ukraine and the investment stock dynamics as the estimated parameters on the indices of democracy, autocracy, polity, and political stability show no statistical significance.

Suggested Citation

  • Cieślik Andrzej & Gurshev Oleg, 2020. "Determinants of inward FDI in Ukraine: Does political stability matter?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 56(3), pages 243-254, September.
    • Handle: RePEc:vrs:ijomae:v:56:y:2020:i:3:p:243-254:n:7
    DOI: 10.2478/ijme-2020-0021
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    More about this item

    Keywords

    foreign direct investment; political stability; Pseudo-Poisson maximum likelihood; Ukraine;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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