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Determinants of Foreign Direct Investment in Georgia

Author

Listed:
  • Jacek Cukrowski
  • George Kavelashiwli

Abstract

Foreign direct investment (FDI) brings host countries capital, productive facilities, and technology transfers, as well as new jobs and management expertise. Thus it is important to understand why in many countries FDI inflow is lower than it would be expected. The goal of this study is to investigate factors determining flow of FDI in Georgia. The key point of the analysis is the impact of stability of economic and legal environment on the pattern of FDI. In particular, we show that (i) the variability of basic macroeconomic fundamentals decreases the flow of FDI, (ii) high volatility of fiscal, business regulations makes FDI smaller, (iii) unstable economic environment does not attract long term investors but mainly speculative capital. Based on theoretical findings we formulate clear message to policy makers stating that in order to expect significant flow of long term and non-speculative foreign capital, first of all, a stable economic and legal environment is needed.

Suggested Citation

  • Jacek Cukrowski & George Kavelashiwli, 2001. "Determinants of Foreign Direct Investment in Georgia," CASE-CEU Working Papers 0039, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:ceuwps:0039
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    File URL: http://www.case-research.eu/upload/publikacja_plik/CEU-CASE39.pdf
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    Cited by:

    1. Tatiana Danescu & Paula Nistor, 2012. "Foreign Direct Investment In Emerging And Developed Economies," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(14), pages 1-20.

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