Determinants of Foreign Direct Investment in Georgia

36 Pages Posted: 19 Jul 2009

See all articles by Jacek Cukrowski

Jacek Cukrowski

CASE - Center for Social and Economic Research

Date Written: July 17, 2009

Abstract

Foreign direct investment (FDI) brings host countries capital, productive facilities, and technology transfers, as well as new jobs and management expertise. Thus it is important to understand why in many countries FDI inflow is lower than it would be expected. The goal of this study is to investigate factors determining flow of FDI in Georgia. The key point of the analysis is the impact of stability of economic and legal environment on the pattern of FDI. In particular, we show that (i) the variability of basic macroeconomic fundamentals decreases the flow of FDI, (ii) high volatility of fiscal, business regulations makes FDI smaller, (iii) unstable economic environment does not attract long term investors but mainly speculative capital. Based on theoretical findings we formulate clear message to policy makers stating that in order to expect significant flow of long term and non-speculative foreign capital, first of all, a stable economic and legal environment is needed.

Keywords: Foreign Direct Investment, FDI, determinants of FDI, Georgia

Suggested Citation

Cukrowski, Jacek, Determinants of Foreign Direct Investment in Georgia (July 17, 2009). CASE-CEU Working Papers No. 39. Available at SSRN: https://ssrn.com/abstract=1435286 or http://dx.doi.org/10.2139/ssrn.1435286

Jacek Cukrowski (Contact Author)

CASE - Center for Social and Economic Research ( email )

Center for Social and Economic Research,
Warsaw
Poland

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