The Impact of Institutional Quality on Foreign Direct Investments: Insight from Western Balkan Region

Sara Mucha () and Besnik Fetai ()
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Sara Mucha: South East European University
Besnik Fetai: South East European University

A chapter in Economic Recovery, Consolidation, and Sustainable Growth, 2023, pp 285-303 from Springer

Abstract: Abstract The aim of this research is to provide empirical evidence and to investigate the impact of institutional quality on foreign direct investment in Western Balkan countries over the period 2000–2019 using the panel data analysis. We used the technique of pooled OLS, fixed effects, random effects, and Hausman–Taylor model with instrumental variables (IV). The results show that only two components of institutional quality have significant correlation with FDI. Rule of law (RL) has a negative effect on FDI while political stability (PS) has shown a positive effect on FDI. Also, the determinant of FDI, such as inflation has shown significant positive correlations with FDI. The policies that should be taken by central and local government to overcome these barriers and identifying motivating strategies for existing investors for the purpose of maintaining and expanding their investment (re-investments) would be a guide for reforms to be made in the development of overall economic and FDI.

Keywords: Foreign direct investment; Institutional quality; Western Balkan; Panel data analysis (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-42511-0_18

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DOI: 10.1007/978-3-031-42511-0_18

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