The Impact of Bilateral Investment Treaties on FDI Dynamics

14 Pages Posted: 21 Sep 2007

See all articles by Peter H. Egger

Peter H. Egger

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Valeria Merlo

University of Tuebingen

Abstract

This paper investigates the impact of bilateral investment treaties (BITs) on foreign direct investment (FDI) in transition countries. FDI stocks are characterised by sluggish adjustment and a dynamic pattern. This leads to biased estimates of the contemporaneous impact of BITs on FDI in static models. In our application, the contemporaneous (short-run) impact of BITs amounts to 4.8 per cent and the long-run effect to 8.9 per cent in the preferred model.

Suggested Citation

Egger, Peter H. and Merlo, Valeria, The Impact of Bilateral Investment Treaties on FDI Dynamics. The World Economy, Vol. 30, No. 10, pp. 1536-1549, October 2007, Available at SSRN: https://ssrn.com/abstract=1015642 or http://dx.doi.org/10.1111/j.1467-9701.2007.01063.x

Peter H. Egger (Contact Author)

Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )

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Ludwig-Maximilians University of Munich

Schackstr. 4
Munich, 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Poschinger Str. 5
Munich, DE-81679
Germany

Valeria Merlo

University of Tuebingen ( email )

Department of Economics
Nauklerstr. 47
Tübingen, 72074
Germany

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