Sectoral Composition of Foreign Direct Investment and External Vulnerability in Eastern Europe

Yuko Kinoshita

No 2011/123, IMF Working Papers from International Monetary Fund

Abstract: In the run up to the global crisis, countries in Central Eastern and Southeastern Europe attracted large capital inflows and some of them built up large external imbalances. This paper investigates whether these imbalances are linked to the sectoral composition of FDI. It shows that FDI in the tradable sectors leads to an improvement of the external balance. We also find that the countries with large market size, good infrastructure, greater trade integration, and educated labor force are more likely to receive more FDI in the tradable sectors.

Keywords: WP; export; FDI inflow; country; FDI stock; share; foreign direct investment; Central Eastern Europe; Southeastern Europe; external vulnerability; tradable FDI; FDI in the nontradable sector; export-platform FDI; Trade balance; Capital inflows; Exports; Capital controls; Western Europe; Baltics (search for similar items in EconPapers)
Pages: 29
Date: 2011-06-01
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2011/123

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