EU Enlargement and Transformation in Eastern Europe Consequences for Foreign Direct Investment in Europe
The article presents a test of a gravity model of foreign direct investment (FDI) stocks and flows. The approach employed turns out to be helpful to understand international FDI activities. The model is used to evaluate the impact of EU enlargement and transformation in Eastern Europe on FDI. The consequences of EU enlargement are far from being clear, as they depend much on the specification of the gravity model. Applied to the Eastern European countries, the model shows that FDI relations are still far below their 'normal' values. Thus, further increase of FDI in Eastern Europe can be expected.
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