Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe
The paper examines the relationship between foreign direct investment (FDI) and domestic investment in Central, Eastern, and South-Eastern European (CESEE) countries from 1995 to 2021. The primary hypothesis posits that FDI exerts a positive influence on domestic investment, with variations...
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| Format: | Article |
| Language: | English |
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Faculty of Economics, Belgrade
2024-01-01
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| Series: | Ekonomski Anali |
| Subjects: | |
| Online Access: | https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642442027B.pdf |
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| author | Bucevska Vesna Merdzan Gunter |
| author_facet | Bucevska Vesna Merdzan Gunter |
| author_sort | Bucevska Vesna |
| collection | DOAJ |
| description | The paper examines the relationship between foreign direct investment (FDI)
and domestic investment in Central, Eastern, and South-Eastern European
(CESEE) countries from 1995 to 2021. The primary hypothesis posits that FDI
exerts a positive influence on domestic investment, with variations observed
across diverse institutional contexts. The research utilises fixed effects
and a one-step difference generalised method of moments (GMM) to determine
whether FDI leads to an increase or decrease in domestic investment in CESEE
countries. The findings indicate that FDI has a favourable and statistically
significant influence on domestic investment. However, the coefficients for
FDI are less than one, indicating that while FDI stimulates overall
investment, it does not create a crowding-in effect where the rise in total
investment surpasses the FDI inflows. When the data is split on the basis of
institutional quality, it is evident that FDI continues to positively impact
domestic investment in high and low-institutional- quality settings. The
coefficients for FDI in both subgroups are less than one, implying that
institutional quality does not substantially change the correlation between
FDI and domestic investment. These results indicate the positive and
significant impact of FDI on domestic investment, without crowding-in
effects for the entire sample of CESEE economies and both subgroups that
differ in institutional quality. |
| format | Article |
| id | doaj-art-84897b726e6f4a1f9e2c83c17232f2e3 |
| institution | OA Journals |
| issn | 0013-3264 1820-7375 |
| language | English |
| publishDate | 2024-01-01 |
| publisher | Faculty of Economics, Belgrade |
| record_format | Article |
| series | Ekonomski Anali |
| spelling | doaj-art-84897b726e6f4a1f9e2c83c17232f2e32025-08-20T02:09:52ZengFaculty of Economics, BelgradeEkonomski Anali0013-32641820-73752024-01-0169242276810.2298/EKA2442027B0013-32642442027BForeign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern EuropeBucevska Vesna0https://orcid.org/0000-0002-4411-4953Merdzan Gunter1https://orcid.org/0000-0002-1894-9623Ss. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje, Chair of Mathematics and Statistics, Skopje, Republic of North MacedoniaSs. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje, Chair of Economics, Skopje, Republic of North MacedoniaThe paper examines the relationship between foreign direct investment (FDI) and domestic investment in Central, Eastern, and South-Eastern European (CESEE) countries from 1995 to 2021. The primary hypothesis posits that FDI exerts a positive influence on domestic investment, with variations observed across diverse institutional contexts. The research utilises fixed effects and a one-step difference generalised method of moments (GMM) to determine whether FDI leads to an increase or decrease in domestic investment in CESEE countries. The findings indicate that FDI has a favourable and statistically significant influence on domestic investment. However, the coefficients for FDI are less than one, indicating that while FDI stimulates overall investment, it does not create a crowding-in effect where the rise in total investment surpasses the FDI inflows. When the data is split on the basis of institutional quality, it is evident that FDI continues to positively impact domestic investment in high and low-institutional- quality settings. The coefficients for FDI in both subgroups are less than one, implying that institutional quality does not substantially change the correlation between FDI and domestic investment. These results indicate the positive and significant impact of FDI on domestic investment, without crowding-in effects for the entire sample of CESEE economies and both subgroups that differ in institutional quality.https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642442027B.pdfdomestic investmentforeign direct investmenteconomic growthfixed effectsgmm |
| spellingShingle | Bucevska Vesna Merdzan Gunter Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe Ekonomski Anali domestic investment foreign direct investment economic growth fixed effects gmm |
| title | Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe |
| title_full | Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe |
| title_fullStr | Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe |
| title_full_unstemmed | Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe |
| title_short | Foreign direct investment, domestic investment, and the role of institutions in Central, Eastern, and South-Eastern Europe |
| title_sort | foreign direct investment domestic investment and the role of institutions in central eastern and south eastern europe |
| topic | domestic investment foreign direct investment economic growth fixed effects gmm |
| url | https://doiserbia.nb.rs/img/doi/0013-3264/2024/0013-32642442027B.pdf |
| work_keys_str_mv | AT bucevskavesna foreigndirectinvestmentdomesticinvestmentandtheroleofinstitutionsincentraleasternandsoutheasterneurope AT merdzangunter foreigndirectinvestmentdomesticinvestmentandtheroleofinstitutionsincentraleasternandsoutheasterneurope |