Patterns of Foreign Direct Investment in the New EU Countries

by Sova, Robert; Albu, Lucian Liviu; Stanciu, Ion and Sova, Anamaria
Published in Romanian Journal of Economic Forecasting
, 2009, volume 10 issue 2, 42-51

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The aim of the paper is to assess the determinants of foreign direct investment (FDI) inflow for the recent members of the EU (CEEC-41) using panel data methods. Our analysis is important because FDI is considered as a main contributor to economic development, modernization, income growth, catching-up process and changes in specialization structure. In this paper, we adopt a rigorous econometric model to explain the FDI inflows. We examine the role played by economic and non-economic factors in FDI attractiveness. Using the gravity model and recent econometric techniques, we obtain the unbiased and convergent estimators. From an econometric point of view, the use of a Fixed Effect Vector Decomposition (FEVD) estimator for the gravity model appears to be convenient for our data sample.

Keywords: gravity models, panel data models, FDI, CEE countries
JEL Classification:
F23, P33, C23