Analysis of the impact of economic factors upon the FDI inflow in SEE and CEE countries

Purpose – The goal of this paper is to explore the possible influence of certain economic factors over the FDI inflow in South-East European (SEE) countries and Central and Eastern European (CEE) countries. We compare the situation in 7 countries from the region of South-East Europe: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro and Serbia and 7 countries from the region of Central and Eastern Europe: Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovenia, and Slovakia. Research method – We apply a holistic approach based on panel data for a twenty-two-year period from 1995 till 2018. The analysis was effectuated through a panel unit-root test. The dependent variable is FDI net inflow (as % of GDP). The study takes into account the following economic variables: annual percentage growth of GDP; labor productivity as GDP per person employed; government consumption as percentage of GDP; inflation rate as annual percentage of GDP deflator; labor force with advanced education (% of the total working-age population with advanced education) and labor taxes and contributions (% of commercial profits). Results – The results indicate that there are differences between the factors that influence the FDI inflow in these two groups of countries. For the South-East European countries government spending, labor force with advanced education, inflation and labor taxes and contributions were the factors that have significant influence over the FDI inflow. For the Central and Eastern European countries all of the included independent variables appear to be significant factors in attracting FDI inflow. Originality / value – In the literature we can rarely find analyses of economic determinants for FDI inflow in the selected groups of countries. Also, the period of twenty-two years from 1995 till 2018 provides novelty of the results and of the conducted analysis.