FDI DRIVERS IN CENTRAL EUROPE, THE BALTICS, AND THE WESTERN BALKANS: THE ROLE OF MACROECONOMIC AND INSTITUTIONAL FACTORS

Neshat Podvorica (), Avdullah Hoti () and Petrit Gashi ()
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Neshat Podvorica: University of Prishtina “Hasan Prishtina”, Faculty of Economics
Avdullah Hoti: University of Prishtina “Hasan Prishtina”, Faculty of Economics
Petrit Gashi: University of Prishtina “Hasan Prishtina”, Faculty of Economics

Economic Thought and Practice, 2025, vol. 34, issue 1, 65-84

Abstract: This paper investigates the role of the business environment on the inflow of foreign direct investments across Central Europe, the Baltics, and Western Balkan countries. It places particular emphasis on the macroeconomic framework and institutional quality of the countries in focus. The paper employs the two-step GMM method on a panel data over the period 2002-2022. Initially, the results suggest a path dependency in FDI inflows. Further, FDI inflows increase with economic growth, trade openness, and price stability. There is no evidence of a statistically significant relationship between FDI inflows and institutional variables. Broadly, findings indicate that, in order to promote foreign investment, governments should prioritize a stable macroeconomic environment, including price stability, as well ensuring a proper integration into the global market. Further research is needed to examine the role of institutional setting in FDI inflows.

Keywords: FDI inflows; macroeconomic stability; institutions; Central Europe; the Baltics; the Western Balkans (search for similar items in EconPapers)
JEL-codes: E22 F21 F23 O52 P33 Q43 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.17818/EMIP/2025/15

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