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Determinants of Foreign Direct Investment in Georgia


  • Jacek Cukrowski
  • George Kavelashiwli


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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    Cited by:

    1. Clemens, Marius & Fuhrmann, Wilfried, 2008. "Rohstoffbasierte Staatsfonds: Theorie und Empirie
      [Resource-based sovereign wealth funds]
      ," MPRA Paper 16933, University Library of Munich, Germany.
    2. repec:krk:eberjl:v:5:y:2017:i:1:p:151-167 is not listed on IDEAS
    3. repec:sgh:annals:i:47:y:2017:p:65-82 is not listed on IDEAS
    4. Suat TEKER & Hayri TUZLA & Aynur PALA, 2014. "Foreign Direct Investments: Asian and European Transition Economies," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 71-82.
    5. 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.
    6. repec:wsi:serxxx:v:58:y:2013:i:02:n:s0217590813500136 is not listed on IDEAS
    7. Derbali, Ahmed & Trabelsi Masmoudi, Lilia & Zitouna, Habib, 2015. "Democratic transition and foreign direct investment: Transition process matters," MPRA Paper 66057, University Library of Munich, Germany.
    8. Kim, Sokchea, 2006. "Bilateral Investment Treaties, Political Risk and Foreign Direct Investment," MPRA Paper 21324, University Library of Munich, Germany.
    9. Groh, Alexander P. & Wich, Matthias, 2009. "A composite measure to determine a host country's attractiveness for foreign direct investment," IESE Research Papers D/833, IESE Business School.
    10. Brancu, Laura & Bibu, Nicolae Aurelian, 2008. "The internationalization Strategies of French Companies in Romania," MPRA Paper 9500, University Library of Munich, Germany.


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