Foreign Direct Investment Models, based on Country Risk for Some Post-socialist Central and Eastern European Economies

Abstract

This paper identifies several econometric models of Foreign Direct Investment (FDI) focused on the country risk, which can also signal other macroeconomic indicators in Czech Republic, Hungary, Poland, Romania, Russia and Slovak Republic, using data from World Bank and major rating agencies after 1996. The first section presents a brief literature review of FDI's theories and conceptualization. Some methodological aspects and database section provides the statistical and econometrical support of this article and the results consist in several econometric models, parameterized in the Eviews and discussions. The modelling focused on major rating agencies (Euromoney and its Country Risk - ECR, the best known European agency, using an average value of Moody's, Fitch, Standard & Poor's country risk) has proved to be competitive not only for Romania, but also for the other post-socialist Central and Eastern European countries. In order to analyze the background of the econometric modelling of FDI, during a long period of transition, two different trends can be identified: the first emphasizing the importance of R squared in the selecting factor's process for the econometric model and the second stressing the primacy of factors’ diversity or the factorial eclecticism. The findings justify the importance of FDI models, as a development factor even in times of recession, highlighting the increasing importance of the country risk signal in different countries, not only of the European Union, but even of global economy. Some final remarks of similitude and alternative constructions close this step by step thought about econometric models of FDI, for the benefit of the future econometric models and new original researches of the authors.