Acta Oeconomica Pragensia 2015, 23(1):45-60 | DOI: 10.18267/j.aop.464

The Impact of Institutional Environment on Inflows of Foreign Direct Investment in European Transition Economies and Latin American Countries

Michal Mádr, Luděk Kouba
Ústav ekonomie, Provozně ekonomická fakulta Mendelova univerzita v Brně (e-mail: xmadr@mendelu.cz; kouba@mendelu.cz).

The main objective of the paper is to identify and quantify the influence of institutional environment on inflows of foreign direct investment in European post-socialist countries and countries of Latin America. The reference period is the period 1996-2012 due to data availability. The World Bank Governance Matters concept is used as the basic indicator of institutional environment. Panel data regression analysis is used for the identification and quantification purposes. According to the results, the influence of institutional environment on FDI is not entirely unequivocal in the European transition economies, but it is statistically significant in the Latin American countries. Furthermore, there are statistically significant areas - quality of democracy and government effectiveness - in the post-socialist countries, and all the institutional areas except the level of democracy in Latin America, mainly regulatory quality and rule of law.

Keywords: institutional environment, foreign direct investment, transition economies, Latin America, Governance Matters
JEL classification: F21, P16, P26

Published: February 1, 2015  Show citation

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Mádr, M., & Kouba, L. (2015). The Impact of Institutional Environment on Inflows of Foreign Direct Investment in European Transition Economies and Latin American Countries. Acta Oeconomica Pragensia, 23(1), 45-60. doi: 10.18267/j.aop.464
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