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Economic Integration and FDI: An Empirical Analysis off Foreign Investment in the EU and in Central and Eastern Europe

In: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies

Author

Listed:
  • PAUL BRENTON
  • FRANCESCA DI MAURO
  • MATTHIAS LÜCKE

Abstract

Recent evidence suggests that regional economic integration provides an important stimulus not only to trade, but also to FDI. In contrast, the available theory on FDI does not yet provide empirically testable propositions on the effects of concurrent trade and investment liberalisation. Moreover, given the limits of simulation models, which rely heavily upon parameter choice, in assessing the impact of such liberalisation, there is a need for empirical analysis to identify the principal features of FDI. This paper uses a ‘gravity model’ approach to assess the impact of the deepening integration between the EU and the CEECs on FDI flows in terms of three key issues. First, we provide systematic estimates or the expected long-term level of FDI in the CEECs. Second, we investigate whether FDI in the CEECs, on the one hand, and source country exports and imports. on the other hand, are complements or substitutes. Finally, we enquire whether an increase in the attractiveness of the CEECs to foreign investors has affected the magnitude of FDI going to other European countries.

Suggested Citation

  • Paul Brenton & Francesca Di Mauro & Matthias Lücke, 2014. "Economic Integration and FDI: An Empirical Analysis off Foreign Investment in the EU and in Central and Eastern Europe," World Scientific Book Chapters, in: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies, chapter 7, pages 125-151, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814603386_0007
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    More about this item

    Keywords

    Trade; Economic Development; Empirical Studies; Modelling;
    All these keywords.

    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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