Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe

Kiel Working Paper 890

45 Pages Posted: 3 Dec 1998

See all articles by Paul Brenton

Paul Brenton

World Bank

Francesca di Mauro

Centre for European Policy Studies (CEPS)

Matthias Luecke

The Kiel Institute for the World Economy; CASE - Center for Social and Economic Research

Date Written: November 1998

Abstract

Recent evidence suggests that regional economic integration provides an important stimulus not only to trade, but also to FDI. In contrast, the available theory on FDI does not yet provide empirically testable propositions on the effects of concurrent trade and investment liberalisation. Moreover, given the limits of simulation models, which rely heavily upon parameter choice, in assessing the impact of such liberalisation, there is a need for empirical analysis to identify the principal features of FDI. This paper uses a "gravity model" approach to assess the impact of the deepening integration between the EU and the CEECs on FDI flows in terms of three key issues. First, we provide systematic estimates of the expected long-term level of FDI in the CEECs. Second, we investigate whether FDI in the CEECs, on the one hand, and source country exports and imports, on the other hand, are complements or substitutes. Finally, we enquire whether an increase in the attractiveness of the CEECs to foreign investors has affected the magnitude of FDI going to other European countries.

JEL Classification: F15, F21, F23

Suggested Citation

Brenton, Paul and di Mauro, Francesca and Lücke, Matthias, Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe (November 1998). Kiel Working Paper 890. Available at SSRN: https://ssrn.com/abstract=139908 or http://dx.doi.org/10.2139/ssrn.139908

Paul Brenton

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Francesca Di Mauro

Centre for European Policy Studies (CEPS) ( email )

1 Place du Congres
B-1000 Brussels, 1000
Belgium

Matthias Lücke (Contact Author)

The Kiel Institute for the World Economy ( email )

P.O.Box 4309
Kiel, D-24100
Germany
+49-431-8814-497 (Phone)

HOME PAGE: http://www.ifw-members.ifw-kiel.de/Members/matthias_luecke_ifw_kiel_de/matthias_luecke_ifw_kiel_de/v

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Register to save articles to
your library

Register

Paper statistics

Downloads
1,746
Abstract Views
5,074
rank
8,904
PlumX Metrics