Title: UNVEILING ECONOMIC CONNECTIONS: A COMPREHENSIVE STUDY ON FOREIGN DIRECT INVESTMENT AND INTERNATIONAL TRADE IN EU NEW MEMBER STATES-11
Authors:
PhD (c) Vigan Disha and Prof. Dr. Sc. Besnik Fetai
Abstract:
The objective of this paper is to delve into a thorough examination of the dynamics governing the interaction between Foreign Direct Investment (FDI) and International Trade within the context of the European Union’s New Member States-11 (EU-NMS 11). The research provides a comprehensive empirical evaluation for the period spanning from 2000 to 2020, with a particular focus on these eleven nations. The study establishes a set of hypotheses as the foundation for investigating the relationship between foreign direct investment and international trade within this specific region.
Moreover, the research interprets the empirical findings derived from various regression models, including Ordinary Least Squares (OLS), Fixed Effects, Random Effects, and the Hausman-Taylor model. These analytical tools are employed to assess and elucidate the multifaceted associations between FDI and International Trade within the context of EU-NMS 11.
Furthermore, the study takes into account specific institutional factors within these countries that influence foreign investors’ decisions to invest in a particular location. As a result, the study reveals that gravity factors, combined with institutional determinants such as economic integration, control of corruption, political stability, and other indicators of governance quality, have a significant impact on host countries within the EU-NMS 11. The findings from this research significantly contribute to the development of an analytical framework for evaluating the effectiveness of national policies and institutions aimed at attracting foreign investment to these specific EU-NMS 11 countries. Additionally, the research underscores the importance of host countries prioritizing efforts to enhance the effectiveness of governmental institutions, combat corruption, streamline bureaucratic processes, and improve overall economic conditions to foster foreign investment.
Keywords: Foreign Direct Investments, International Trade, European Union New Member States, Economic Development.
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