International Journal of Social Science & Economic Research
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Title:
DETERMINANTS OF FDI IN CEE COUNTRIES

Authors:
Alina Mihaela Ciobanu

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Alina Mihaela Ciobanu
Romanian Academy, Bucharest, Romania

MLA 8
Ciobanu, Alina Mihaela. "DETERMINANTS OF FDI IN CEE COUNTRIES." Int. j. of Social Science and Economic Research, vol. 6, no. 10, Oct. 2021, pp. 3719-3738, doi.org/10.46609/IJSSER.2021.v06i10.006. Accessed Oct. 2021.
APA 6
Ciobanu, A. (2021, October). DETERMINANTS OF FDI IN CEE COUNTRIES. Int. j. of Social Science and Economic Research, 6(10), 3719-3738. Retrieved from doi.org/10.46609/IJSSER.2021.v06i10.006
Chicago
Ciobanu, Alina Mihaela. "DETERMINANTS OF FDI IN CEE COUNTRIES." Int. j. of Social Science and Economic Research 6, no. 10 (October 2021), 3719-3738. Accessed October, 2021. doi.org/10.46609/IJSSER.2021.v06i10.006.

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Abstract:
Using a panel data analysis over the period of 1996-2019, we try to identify the major determinants of foreign direct investments inflows to five CEE countries. The Pedroni and Kao cointegration test results show the presence of long-run relationships between FDI and financial developments, economic growth, inflation, trade openness, labor cost, and real effective exchange rate (REER). Using a Fully Modified Ordinary Least Squares (FMOLS) and the vector error correction model (VECM), the real GDP per capital, labor cost, and trade openness have a positive and significant impact on FDI inflows. On the other hand, transition countries don't need better developed financial markets in the FDI-growth nexus. The empirical analysis on CEEs data revels that the compensation of employees as a share of GDP, used as a proxy for labor cost, has a positive effect on FDI and is statistically significant. This implies that higher wage levels increase FDI inflows into transition economies, one of the positive spillovers of foreign companies in home countries where they operate, by offering higher wages for more qualified labor force who can adopt new and advanced technology easily.

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