Determinants Of Foreign Direct Investment In Transition Economies, With Special Reference To Macedonia: Evidence From Gravity Model

Bardhyl Dauti

South East European Journal of Economics and Business, 2015, vol. 10, issue 2, 7-28

Abstract: This paper accounts for the main determinants of Foreign Direct Investment stocks to 5-South East European Countries and the 10-New Member States of the European Union countries by using an augmented Gravity Model, for the purpose of calculating the potential levels of FDI stock in Macedonia. The study takes into account country specific institutional factors that determine foreign investors’ decisions from 20 core OECD countries to invest in SEE-5 and EU-NMS-10 countries. From the results of the study we find that gravity factors (market size and distance), institutional related factors (control of corruption, corruption perception index, regulatory quality, transition progress and WTO membership) and other traditional determinants of FDI (schooling, bilateral exports) appear to significantly determine inward FDI stock to the SEE region and new EU member states. The GMM estimates suggest that bilateral FDI stock is subject to persistence effects. The study additionally confirms the relatively strong gravitational character of Macedonia’s inward FDI stock.

Keywords: Foreign Direct Investment; SEECs; Panel Econometrics; Gravity Model (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:10:y:2015:i:2:p:7-28:n:1

DOI: 10.1515/jeb-2015-0007

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South East European Journal of Economics and Business is currently edited by Adnan Efendic, Vesna Babić-Hodović and Aziz Šunje

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