The Determinants of Foreign Direct Investment in Central and Eastern Europe

Abstract

This study explores the determinants of FDI in CEE economies based on a panel data model of 10 CEE countries over a period of 10 years. The aim of this research is to identify driving forces behind the decision of foreign actors to invest in the region. Three groups of relevant determinants are identified: traditional market- and efficiency-seeking factors as well as transition-specific variables. Fixed effects and random effects models are employed to compare the results of various estimation methods. Results suggest that besides the importance of traditional factors, the impact of transitional variables in the region should not be neglected.