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Given the importance of FDI for the economic growth of both home and host countries, the aim of this paper is to assess the importance granted to location advantages during the development of FDI theory. We start with the earliest theoretical directions as regards FDI location issues and extend our study to describing less debated theories, but of a particular importance for this theme. In this way, we have the opportunity to emphasize the changes in FDI location determinants. We find that a direction of the FDI theories’ expansion is due to the incorporation of new variables on location, although the location advantages are barely mentioned in the first explanations regarding the international activity of the firms.

The aim of this paper is to identify if the drivers of inward foreign direct investments’ stocks in Central and Eastern European countries changed in the last 20 years, given two substantial economic evolutions encountered in this period: the transition process and the adhesion at the European Union. We are interested if foreign investors are attracted by the quality of institutions, the labour market or by the telecommunications infrastructure, expressed by 10 variables, in the 11 newest EU member states. Therefore, we use a fixed effects panel data approach during 1994-2013 which we apply in two stages. In the first stage, we find the variables that strongly influence FDI in each of the three groups of determinants. In the second stage, the panel data analysis is applied only for the variables previously find as significant for FDI, to which we add traditional FDI determinants, such as trade openness and GDP per capita. Also, the mentioned years are divided into two sub periods, the first representing the transition period (from 1994 until 2003) and the second one the years comprising the EU adhesion process (from 2004 until 2013). The results confirm that there are changes in FDI determinants in these countries. During 1994 to 2003, investors were mostly interested in the quality of institutions, the openness of the economies and the environments capable of growth, where the products can be sold. For the period starting with 2004, the analyzed countries are attractive mainly through their capacity of providing labour force with low costs and created resources, such as the development of the mobile networks. The results obtained are of particular importance for the public policy decision makers, as the changes in FDI determinants require the adaptation of public policies in the CEE countries in order to remain attractive for foreign investors.

The paper focuses on the trade performance of Romania, a representative country for the Central and Eastern European region, strongly connected with its European partners in global value chains and thus affected by any change in these countries' relationships with the rest of the world in general and China in particular. Using panel data gravity models for the 2008-2019 period, we find that Romania's exports are significantly influenced by the demand of its major trade partners in the EU, and imports from China and the rest of the world. In addition, exports are vulnerable to the effectiveness of the government in relation to the other countries, corruption control and cultural values such as collectivism. We also assess the capacity of Romanian exports to regain their ascending trend displayed before the COVID-19 pandemic by using simulation forecasting scenarios based on the shape of the economic recovery and the type of shock transmission across economies. We observe a sharp decrease in 2020 followed by an important recovery in 2021 in a V-shape scenario and uniform transmission of the pandemic shock in the internal demand and in the foreign trade, or followed by a very slow recovery in 2021 (in a U-shape scenario and non-uniform transmission type in the two previously mentioned elements), especially when the global relation with rest of the world is included. [ABSTRACT FROM AUTHOR]

In the current situation, shaped by the relocation of multinational companies following the disruption of global value chains, the efforts for attracting foreign direct investments (FDI) should be better focused on enhancing the flows that create value in the economy, stimulate the local business environment, and are destined to sectors with high value added. The aim of this paper is to identify the factors shaping competitiveness in Central and Eastern European countries that also matter for the foreign investors' decision regarding location. We have taken an innovative approach in dealing with the large range of FDI determinants and we have used the machinelearning based random forest methodology to identify the most important predictors of FDI in CEE countries from a set of 15 indicators also present in the calculation of the European Regional Competitiveness Index 2019. Our results show that countries' particularities, market size, digitalization of the economy, labour force characteristics (such as population in tertiary education and employment in knowledge-intensive services and high-tech manufacturing sectors), and economic potential market are the factors with the highest contribution in attracting FDI in the CEE region. [ABSTRACT FROM AUTHOR]

In this paper, we assess Romania's position in terms of legal and institutional needs for ensuring the functioning of the European Fund for Strategic Investments, as Romania is one of the countries that lost the start of the Juncker Plan. The analysis we provide points to several shortcomings that threatened the application of the additionality principle: an inoperative public-private partnership law, the absence of a national promotional institution, difficulties in establishing connections between the public and the private entities. Based on the comparison between the European Commission's requirements for enhancing the implementation of the Juncker Plan and the existing situation in Romania, we provide several public policy measures for capitalizing the potential of the Juncker Plan. The main findings indicate the need of a functional legislative framework that regulates the institutional public-private partnership contract and the establishment of a public-private partnership unit with high visibility for the private actors in the institutional machinery; the construction of investment platforms for improving the involvement of private environment in the economy; and diminishing the time for establishing a national promotional bank, as it represents the institution that connects these instruments and has an important role in their functioning under the auspices of the Juncker Plan. [ABSTRACT FROM AUTHOR]

We study the relationship among remittances, financial development and growth using the system GMM, full sample Granger causality test and the sub-sample rolling window estimation approach for the case of Pakistan. This paper uses annual and monthly series that cover the 1992 to 2015 interval. The results of the System GMM reveal that remittances negatively affect financial development and growth in the cases in which they are not directed towards investments. In theory, remittances stabilize financial institutions and accelerate the growth process. The full-sample causality results find a unidirectional causal relationship running from financial development to remittances. The parameter stability test hints at evidence of the presence of structural changes. Therefore, this investigation relied on a bootstrap subsample rolling window causality approach that has the unique characteristic of identifying time variation in the sub-sample data. Moreover, the rolling sum of coefficients exhibits the magnitude and direction of the causal relationship. The results of the dynamic sub-sample causality approach show that there is a bidirectional causal relation between remittances and financial development. This sub-sample is correlated with relevant economic occurrences, fact that demonstrates that the results are not a simple statistical artefact. [ABSTRACT FROM AUTHOR]

The present paper deals with the relationship between GDP, FDI and merchandise exports using a vector error-correction model (VECM). The empirical model is based on quarterly data for the period 2005-2014 in Romania. The Granger causality test indicate a positive significant bidirectional relationship and between FDI and GDP and a unidirectional relationship between GDP and exports. The variance decomposition indicates that more than 50% of the fluctuations in FDI are explained by the shocks in GDP, while the influence of shocks in exports is quite low. Fluctuations in GDP are largely explained by the shocks occurring in this variable. As regards exports, 44% of fluctuations are due to FDI, while the impact of GDP reaches 13-15% after 10 quarters. [ABSTRACT FROM AUTHOR]

This paper tests for the presence of fiscal convergence in 27 EU countries during 1995-2012. We use the methodology proposed for ft convergence in order to check for similarities and divergences between the old and the new EU member states as regards the convergence speed. We are also interested if the pace of convergence was maintained during the whole period or if there are differences between the years 1990s and 2000s. The panel data model is used in order to analyse the convergence on groups of countries and time periods. The results point to the existence of the fiscal convergence process in both the old and the new EU member states, but with major differences depending on the period analysed. [ABSTRACT FROM AUTHOR]

The objective of this paper is to identify how an increase in competitiveness could improve FDI in ten Central and Eastern European (CEE) countries. For assessing competitiveness, we employ the variables used by World Economic Forum in designing the Global Competitiveness Index and find that half of the analyzed countries could see the most important increases in FDI/capita if making institutions more competitive, four other countries should accelerate on improving innovation and infrastructure while another country should work on labour market efficiency. We also calculate the potential increase in FDI/capita due to similar changes in different competitiveness variables. [ABSTRACT FROM AUTHOR]

The aim of this paper is to identify to what extent the notions of organizational and regional competitiveness are similar, in order to be targeted by a comprehensive set of public policy measures. In this respect, we discuss the notions of organizations' and regional competitiveness and find common factors of influence, namely innovation, networks and regulation. Based on these factors, we search for empirical evidences as regards the mutual impact between the competitiveness of organizations and competitiveness of regions. We present the results using the example of foreign direct investment companies, as their location decision making process is based on assessing both the competitiveness of organizations and the advantages of locations that point to the competitiveness of a location and, extended, to that of a region. While the dissonance is expressed in the differences of interpretation for the two notions, there is a consonant policy that can be employed for supporting both organizational and regional competitiveness: the cluster policy. [ABSTRACT FROM AUTHOR]

Labour market determinants are considered among the main factors attracting FDI in transition countries. The aim of this paper is to to emphasize the importance of the labour market in attracting FDI in both Central and Eastern and Western European countries. Using a fixed-effects panel data approach during 1996-2013, we find that labour market determinants are still important for foreign investors, but that they are different according to the group of countries considered. Also, the quality of the labour market is more important for investors in the new EU countries than for the old EU member states. Finally, we are signaling that the variables used until recently for describing labour market are not enough for assessing its entire complexity; more variables expressing the quality of the labour market should be included in further empirical studies. [ABSTRACT FROM AUTHOR]

This paper aims to study the dynamics of the volatilities of euro currency pairs and bond markets and seeks to determine the possible connections between the two. For this purpose the methodology involves three types of GARCH models calibrated on series of six euro currency pairs and on 10-year maturity government bonds from the corresponding countries. The results indicate that the volatilities of the currency returns are connected to the corresponding governmental bond returns. Taking into account the fact that these bonds react mostly to macroeconomic events, we can conclude that new events impacts the volatility of currency returns at the daily frequency. [ABSTRACT FROM AUTHOR]

In the world of knowledge economy and competitiveness in which we live today, the economic growth is built on innovation. Our interest in the present paper is to find if innovation is a factor that shaped the attractiveness of EU location for foreign investors during the economic crisis. In this respect, we use the Pearson correlation coefficient. We find weak correlation between innovation and FDI stocks at the EU level during 2006-2013, with a higher and significant correlation between the two variables in the new EU countries until 2009. We do not find significant correlations in the old member states, probably because the group of member states is too heterogeneous. Also, we obtain significant positive correlation only in 11 countries out of 28, without identifying any preference related to the EU adhesion moment. [ABSTRACT FROM AUTHOR]

In this paper, we study the relationship between GDP and FDI in Romania and we also assess the importance of GDP level for further attracting FDI. Using an ARMA model, we find that FDI in Romania is not explained by the value in the previous period, but is due to the evolution of the errors in the previous period. In the range 1990-2013 we obtain a valid relationship between FDI and real GDP growth. According to the variance decomposition of FDI, we can conclude that 1.06% of the variation of FDI is explained by the changes in real GDP rate in the first period. Then, the influence of GDP rate decreases in time, the variance of FDI explained by GDP rate having a value close to zero in the 10th lag. [ABSTRACT FROM AUTHOR]

Credit risk governs all financial transactions and it is defined as the risk of suffering a loss due to certain shifts in the credit quality of a counterpart. Credit risk literature gravitates around two main modeling approaches: the structural approach and the reduced form approach. In addition to these perspectives, credit risk assessment has been conducted through a series of techniques such as credit scoring models, which form the traditional approach. This paper examines the evolution of these initiatives. [ABSTRACT FROM AUTHOR]

This paper analyzes the location decision for foreign direct investments (FDI) in Central and Eastern European (CEE) countries based on the attractiveness of policies most influenced by public officials. Our assessment of the FDI inflows in a country is based on four pillars: infrastructure, quality of institutions, labor market and taxes. The attraction degree of the CEE countries in 2007 and 2010 is calculated using the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method, a tool usually used for decision-making issues. The empirical result indicates that Estonia is the most attractive country for investments (as regards the public policy approach). Globally, the paper establishes the state's role in attracting FDI and identifies whether there is room for further improvement on the public policy side. [ABSTRACT FROM AUTHOR]

The latest European Union measures for combating climate adopted in the "Fit for 55 package" envisage the extension of the Emissions Trading System, the first "cap-and-trade" system in the world created for achieving climate targets, which limits the amount of greenhouse gas emissions by imposing a price on carbon. In this context, our study provides an integrated assessment of carbon price risk exposure of all economic sectors in the European Union Member States, thus supporting decision making in determining the energy transition risk. We propose a novel approach in assessing carbon risk exposure using the Value at Risk methodology to compute the carbon price under the EU ETS, based on historical price simulation for January–August 2021 and ARMA-GARCH models for the October 2012–August 2021 period. We further built a value erosion metric, which allowed us to establish each sector's exposure to risk and to identify differences between Eastern and Western EU countries. We find that the refining sector appears to be highly vulnerable, whereas there is higher potential for large losses in the energy supply and chemical sectors in Eastern EU Member States, given a different pace of industry restructuring. [ABSTRACT FROM AUTHOR]

The European Union's environmental goal by 2050 is to become the first climate-neutral continent in the world. This means specific efforts for diversifying the energy mix and investing in low-carbon energy. Our study investigates the nexus among carbon emissions, energy consumption and mix, and economic growth in a modified framework that includes the contribution of inward foreign direct investments and international trade to lowering air pollution. We have used a two-step approach to explore in more detail the links between these variables in 24 EU countries over the period 1995–2018, followed by a panel VECM analysis. Our results indicate that there is a unidirectional link between economic growth and CO2 emissions, which should imply a decoupling of environmental improvement measures from the pace of economic growth. We also find bidirectional causal relationships between low-carbon energy shares in consumption and CO2 emissions, as well as between low-carbon energy share in consumption and GDP per capita, which confirms both pollution haven and the halo effect hypotheses for FDI on gas emissions. However, in the long term, FDI, exports, and imports have positively impacted the reduction in CO2 emissions; therefore, stronger EU investment and trade integration should be promoted to improve the quality of the environment. [ABSTRACT FROM AUTHOR]

The aim of this paper is to assess the similarities and the differences in the theoretical frameworks that deal with international competitiveness and location attractiveness for FDI. We provide some insights in the evolution of definitions regarding the international competitiveness and emphasize its newest characteristics stated by scholars that resemble with the ones proposed for increasing the attractiveness of a location for FDI. We then assess whether the particularities and impact of FDI inflows in the host country could overlap the performance required for that a country to be considered internationally competitive. We investigate both the literature and the empirical evidence as regards the impact of FDI on host countries and we debate the role FDI could play in increasing the international competitiveness of economies. Finally, we provide some public policies measures that could be taken in order to enhance a country’s attractiveness for FDI and increase its international competitiveness.

The paper builds on the burning issue of the attractiveness of the location for foreign direct investments (FDI), assuming its positive and substantial economic impact on the development of the host country. The location decision for FDI in Central and Eastern European (CEE) countries is investigated based on the attractiveness framework designed by policy makers: infrastructure endowment, institutions’ quality, labour market conditions and level of taxation. The analysis assesses the FDI inflows in a country in three years: 2004, 2007 and 2010. Thus the FDI evolution relative to public policies attractiveness is seized starting with the European Union (EU) integration and after the crisis started. The paper follows the literature on the determinants of the FDI related to the L (location) factor described in the eclectic paradigm of Dunning (the OLI model), but focuses on the role of public policies in attracting FDI and captures two of the recent major turning points faced by the CEE countries, scarcely tackled in the literature: the EU integration and the recent economic crisis. We compute a public policy index, constructed as a composite measure, based on the four pillars mentioned above, in order to test the public policies attractiveness in the CEE countries. Moreover, we develop an attractiveness matrix starting from the public policy index, and we rank the most attractive countries for FDI in the three years. We analyze the matrix based on the FDI inflows per capita. We found a positive relation between the increase in the public policies attractiveness and the inward FDI. The increase of the FDI per capita since the EU accession year is, at least partially, due to the increasing attractiveness of the public policies. The crises worsened the CEE countries’ attractiveness. Still, the winners in the race for FDI remained those countries that improved the infrastructure, the institutions’ quality and the labor market conditions. Therefore, short and medium term policy directions can be emphasized. Infrastructure and institutions’ quality can be improved for further attracting FDI during rough budgetary constraints. The literature is enriched with the empirical analysis of the FDI determinants in the recent years. Our paper takes into account the major events faced by the CEE countries in the last years and checks for potential methods of attracting FDI even during difficult economic conditions.

The target of this paper is to determine whether taxation affects the attractiveness of Central and EasternEurope (CEE) countries for foreign investors. In this scope, the paper analyzes the impact of taxation for thelocation decision of foreign direct investment (FDI) in CEE countries both in 2007 and 2010. A taxation indexinvesting the effect of multiple host country taxes is developed in order to draw the attractiveness matrix for thecountries taken into account. The taxation level comprises the corporate income tax rate, representing directtaxation, the value-added tax (VAT) and the social security contributions expressing indirect taxation and finally theease of paying taxes, as provided in Doing Business report. The results indicate that relieving the burden of payingtaxes by tackling the taxation issue is a mean for improving the FDI attractiveness of a country. Still, there are otherfactors that have higher influence on FDI inflows. The main finding is that there is no perfect correspondencebetween the shifts in taxation rankings and the FDI inflows performance.