FDI Flows in Balkans: What is Contributing to this Important Pillar for Growth?

Abstract

Many countries in the Balkan region have long been awaiting their accession in the European Union. Countless efforts, governmental reforms and policies are undertaken to ensure compliance with the international standards, adoption of best practices and to steer economic growth. Foreign direct investments serve various functions in the host economies, thus potentially triggering also economic growth. Given other advantages that these countries have such as the favorable climate and geographical location, FDI can become an important complementary pillar for growth if supported by adequate reforms targeting justice system, fair competition, and stability. On the face of rapid globalization, it becomes important to know how the region is benefiting from international capital flows and how various factors from different spheres shape them. In this paper, secondary data collected over the course of the last decade is used to study the financial, political, legal, and economic factors that shape FDI. The panel-data regression analysis allows identifying how policymakers can channel their policies into supporting FDI and creating solid foundations to reap the full benefits arising from them. This study provides an up-to-date, comprehensive analysis, which does not only contribute to the existing regional literature, but also to academia, practitioners, and pertinent stakeholders.