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Determinants Of Foreign Direct Investment In Transition Economies, With Special Reference To Macedonia: Evidence From Gravity Model

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  • Dauti Bardhyl

    (Department of Economics, Faculty of Economics, State University of Tetova, Macedonia)

Abstract

This paper accounts for the main determinants of Foreign Direct Investment stocks to 5-South East European Countries and the 10-New Member States of the European Union countries by using an augmented Gravity Model, for the purpose of calculating the potential levels of FDI stock in Macedonia. The study takes into account country specific institutional factors that determine foreign investors’ decisions from 20 core OECD countries to invest in SEE-5 and EU-NMS-10 countries. From the results of the study we find that gravity factors (market size and distance), institutional related factors (control of corruption, corruption perception index, regulatory quality, transition progress and WTO membership) and other traditional determinants of FDI (schooling, bilateral exports) appear to significantly determine inward FDI stock to the SEE region and new EU member states. The GMM estimates suggest that bilateral FDI stock is subject to persistence effects. The study additionally confirms the relatively strong gravitational character of Macedonia’s inward FDI stock.

Suggested Citation

  • Dauti Bardhyl, 2015. "Determinants Of Foreign Direct Investment In Transition Economies, With Special Reference To Macedonia: Evidence From Gravity Model," South East European Journal of Economics and Business, Sciendo, vol. 10(2), pages 7-28, December.
    • Handle: RePEc:vrs:seejeb:v:10:y:2015:i:2:p:7-28:n:1
    DOI: 10.1515/jeb-2015-0007
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    Cited by:

    1. Adriana Burlea‐Schiopoiu & Simina Brostescu & Liviu Popescu, 2023. "The impact of foreign direct investment on the economic development of emerging countries of the European Union," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2148-2177, April.
    2. Manamba Epaphra, 2018. "An Econometric Analysis of the Determinants of Foreign Direct Investment in Africa," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 21(67), pages 63-97, March.
    3. Kryeziu Liridon & Coşkun Recai, 2018. "Political and Economic Institutions and Economic Performance: Evidence from Kosovo," South East European Journal of Economics and Business, Sciendo, vol. 13(2), pages 84-99, December.
    4. Elya Nabila Abdul Bahri & Abu Hassan Shaari Md Nor & Nor Hakimah Haji Mohd Nor, 2018. "The Role of Financial Development on Foreign Direct Investment in ASEAN-5 Countries: Panel Cointegration with Cross-Sectional Dependency Analysis," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 14(1), pages 1-23.

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