Inward FDI Stock and Growth in Central and Eastern Europe

Abstract

This article analyses the foreign direct investment (FDI) in Central and Eastern Europe (CEE) during the post-communist era and tests the hypothesis that FDI contributes to the economic growth of the CEE countries. It reflects macroeconomic changes in post-communist CEE, underlines the role of the European Union membership and regulatory framework in attracting foreign investors, and estimates the impact of the FDI stock on economic growth in the CEE using a regression growth model based on the production function. This article finds a large impact of FDI stock on output growth.

Keywords:

• foreign direct investment
• economic growth
• Central and Eastern Europe

ACKNOWLEDGMENT

The authors would like to thank Henry Thompson for significant help and contribution to the final version of this article.

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