Determinants of foreign direct investment in central and eastern Europe: a cross-section analysis

The first part of the report contains a broad overview of the literature on foreign direct investment (FDI), with emphasis on the determinants of FDI in transition economies. The second part of the report presents the outcomes of an empirical investigation into the determinants of direct investment from EU-countries to Central and Eastern European countries from the early nineties on. Important factors for FDI in this region are the progress of reforms and privatization, the presence of trade relations and the geographical distance. Also, a stable macro economic climate in terms of for example low inflation is found to be an important stimulus for FDI in this region.