The Impact of Country Risk Ratings and of the Status of EU Integration on FDI Inflows in CESEE Countries

Nadja Walch () and Julia Wörz ()
Additional contact information
Nadja Walch: University of Innsbruck
Julia Wörz: Foreign Research Division, Oesterreichische Nationalbank, http://www.oenb.at
Authors registered in the RePEc Author Service: Julia Maria Woerz ()

Focus on European Economic Integration, 2012, issue 3, 8-26

Abstract: We analyze the determinants of foreign direct investment (FDI) inflows in the ten EU Member States, plus Croatia, in Central, Eastern and Southeastern Europe (CESEE) over the period from 1995 to 2011, with a particular focus on the effects of country risk ratings and the EU integration status on a country’s attractiveness for FDI. We distinguish between twelve different risk ratings and seven stages of integration (non-EU country, potential candidate country, candidate country, negotiating country, EU Member State, ERM II member country and euro area country). Using quarterly data, we identify the market size and cost factors as the most important determinants, suggesting that market- and efficiency-seeking FDI were the most prevalent forms of FDI in the region. The host country’s infrastructural environment also has the expected positive effect on FDI inflows. The effects of risk ratings turn out to be nonlinear in the sense that improvements in intermediate risk levels have the largest positive effect on FDI, while this effect diminishes in the case of upgrades at the highest levels. Turning to the status of EU integration, a more advanced stage represents an additional bonus over pure cost- and market-related factors, but only up to the onset of the global financial and economic crisis.

Keywords: Foreign direct investment; European integration; country risk ratings (search for similar items in EconPapers)
JEL-codes: C33 F15 F21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://www.oenb.at/dam/jcr:075150f4-eb64-477f-956 ... es1_tcm16-249595.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:onb:oenbfi:y:2012:i:3:b:1

Ordering information: This journal article can be ordered from
Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

Access Statistics for this article

Focus on European Economic Integration is currently edited by Julia Wörz and Elisabeth Beckmann

More articles in Focus on European Economic Integration from Oesterreichische Nationalbank (Austrian Central Bank) P.O. Box 61, A-1011 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Beckmann ().