Determinants of Foreign Direct Investments in Bulgaria and Romania in the Context of Recent Economic Crisis

Mirel-Daniel Simionescu ()

Academic Journal of Economic Studies, 2017, vol. 3, issue 1, 68-72

Abstract: The objective of this paper is to select some relevant macroeconomic determinants for foreign direct investment (FDI) in Bulgaria and Romania since the start of the recent economic crisis (2008-2015). Even if the economic recession installed in 2009 in Romania, the foreign investors’ decisions were influenced by the moment of global recession from 2008. A Bayesian approach was proposed, because of the small sample for the variables in analyzed period: FDI as percent of GDP, real GDP rate, unemployment rate, inflation rate, real interest rate, real effective exchange rate index (2010=100) and money demand (M2) as percent of GDP. The estimation results reflected that foreign investors in both countries were attracted by the increase in GDP from a year to another. On the other hand, for Bulgaria the inflation rate was the strongest determinant, indicating the economic stability of the country that made huge efforts in getting one digit inflation rate. In Romania, as expected, the foreign investors were searching for cheap labour force and the increase in unemployment rate attracted more FDI during the crisis period.

Keywords: Foreign direct investments; economic crisis; Bayesian model; posterior distribution (search for similar items in EconPapers)
JEL-codes: C51 C53 E22 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:khe:scajes:v:3:y:2017:i:1:p:68-72

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