Prague Economic Papers 2015, 24(3):260-273 | DOI: 10.18267/j.pep.518

FDI to EU15 and New Member States: Comparative Analysis of Inflow Determinants

Viktorija Igošina
University of Economics in Prague, Faculty of International Relations - International Trade (xihov01@vse.cz).

Wide range of academic studies and economic practice are showing strong correlation between GDP growth and FDI flows. Moreover, there is a number of cases when FDI inflows were positively impacting economic development. That provides grounds and needs for profound research in the area of investment determinants. The main objective of this paper is to classify FDI determinants in the EU countries. All assuming that there are differences between the two groups - old and new member states. The econometrical approach of gravity modelling was chosen as the most appropriate methodology to analyse panel data set. Panel is depicting FDI flows coming from the external nonEU investors and does not include intra EU investment flows among the member countries (firstly due to the relative insignificance of the intra-EU flows compared to the outer inflow values and secondly due to the need to answer what exactly leads non-European investor to opt for the EU country A and not B). The random effect model has proved diversity in FDI flows determinants. Study outcomes support the need for policymakers' attention in the EU investment policy harmonization, towards market equalization that would improve competiveness of the whole EU region.

Keywords: foreign direct investment, panel data, EU integration, gravity based modelling, fixed effect, random effect
JEL classification: C23, F15, F21, F23

Published: January 1, 2015  Show citation

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Igošina, V. (2015). FDI to EU15 and New Member States: Comparative Analysis of Inflow Determinants. Prague Economic Papers, 24(3), 260-273. doi: 10.18267/j.pep.518
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