Foreign Direct Investment in Southeastern Europe: How (and How Much) Can Policies Help?

IMF Working Paper No. 05/110

Posted: 14 Jul 2005

See all articles by Balazs Horvath

Balazs Horvath

International Monetary Fund (IMF) - European Department

Dimitri G. Demekas

International Monetary Fund (IMF)

Elina Ribakova

International Monetary Fund (IMF)

Yi Wu

Georgetown University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2005

Abstract

Gravity factors explain a large part of Foreign Direct Investment (FDI) inflows in Southeastern Europe - a region not comprehensively covered before in econometric studies - but host-country policies also matter. Key are policies that affect relative unit labor costs, the corporate tax burden, infrastructure, and the trade regime. This paper develops the concept of potential FDI for each country, and uses its deviation from actual levels to estimate what policies can realistically be expected to achieve in terms of additional FDI. It also finds evidence that above a certain threshold, the importance of some policies for attracting FDI is distinctly different.

Keywords: Foreign direct investment, Southeastern Europe, transition economies

JEL Classification: C33, F21, O16, P27

Suggested Citation

Horvath, Balazs and Demekas, Dimitri G. and Ribakova, Elina and Wu, Yi, Foreign Direct Investment in Southeastern Europe: How (and How Much) Can Policies Help? (June 2005). IMF Working Paper No. 05/110, Available at SSRN: https://ssrn.com/abstract=755404

Balazs Horvath (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Dimitri G. Demekas

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Elina Ribakova

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

Yi Wu

Georgetown University - Department of Economics ( email )

ICC 580
Washington, DC 20057
United States
202-687-5601 (Phone)
202-687-6102 (Fax)

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