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

Author/Editor:

Elina Ribakova ; Balázs Horváth ; Dimitri G Demekas ; Yi Wu

Publication Date:

June 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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 hostcountry 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.

Series:

Working Paper No. 2005/110

Subject:

Corporate income tax Foreign direct investment Foreign exchange Labor costs Stocks

English

Publication Date:

June 1, 2005

ISBN/ISSN:

9781451861297/1018-5941

Stock No:

WPIEA2005110

Pages:

31

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