The impact of foreign direct investment on the economic development of emerging countries of the European Union

Abstract

AbstractStarting from the premise that the impact of foreign direct investment (FDI) on the economies of the host countries is different from one economy to another, the aim is to evaluate the impact of a set of economic and social indicators on FDI and net income (% GDP–Gross Domestic Product) in emerging, ex‐socialist countries of the European Union. Using econometric models, we analysed the relationship between the evolution of the net FDI inflows and a number of statistical indicators. Our findings proved that there are similarities between the countries analysed, in terms of the evolution of net FDI inflows, with some differences being recorded for Hungary, where the evolution of net FDI inflows has major fluctuations. We found that the countries present both similarities and differences in terms of variables that affect FDI. The FDI net inflows (% GDP) are in seven, out of nine economies, positively influenced by GDP, as it follows: Bulgaria, Lithuania and Slovenia are FDI attractive by an increasing GDP rate, while Latvia, Poland and Romania react to a better GDP per capita. Hungary is the only one that is positively influenced by both GDP rate and GDP per capita. Moreover, a decreasing corruption perception index, country risk rating, income tax (% of commercial profit) and other taxes paid by companies (% commercial profit) can positively influence the inflows of FDIs in some of the analysed countries.