HOW ECONOMIC UNCERTAINTY AFFECTS FOREIGN DIRECT INVESTMENT INFLOWS: EVIDENCE FROM CENTRAL AND EASTERN EUROPEAN COUNTRIES

Abstract

This paper investigates the impact of the Economic Uncertainty (proxied by World Uncertainty Index of Ahir et al. 2018) on the foreign direct investments (FDI) inflows for 10 countries in Central and Eastern Europe for the period of 1990-2018. Panel data analysis shows that economic uncertainty in a country does not have any statistically significant effect on FDI inflows. However, European uncertainty and global uncertainty dampen the FDI inflows to CEE countries (Central and Eastern European Countries). This shows that the regional (European) and global uncertainty rather than domestic uncertainty affect the FDI inflows. This finding provides important implications for policy makers.