Abstract
This study investigates the impact of OLI paradigm and the IDP on the gravity model of FDI in EECA region. Using panel data from 1995 to 2017, the analysis employs POLS, Fixed Effects, and Random Effects estimation methods to examine the determinants of FDI inflows. The results highlight the significance of the receiving country's GDP and labour market quality as the most consistent and statistically significant factors influencing FDI inflows. The distance between source and receiving countries also exhibits a negative relationship with FDI flows. Other variables, such as the source country's GDP, tertiary education, institutional governance, taxation, infrastructure, foreign exchange rates, and labour costs, do not show consistent or statistically significant effects across the estimation methods. The Fixed Effects model demonstrates the highest explanatory power, suggesting its suitability for capturing the variation in FDI inflows. These findings contribute to understanding the determinants of FDI and provide insights for policymakers and investors. Countries aiming to attract FDI should focus on promoting economic growth, improving labour market conditions, and reducing perceived distances between source and receiving countries.
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