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2019 | 36 | 103-122

Article title

Institutional quality as a determinant of FDI inflow: the case of Central and Eastern European countries


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In the article, we focus on the institutional aspects and their role in attracting foreign direct investment (FDI). Hence, the objective of the paper is to assess institutional quality in 17 countries of Central and Eastern Europe and to examine the relationship between the quality of institutions measured with the synthetic index of institutional quality and FDI inflow. This study is structured as follows. First, it explores the existing literature on factors of investment attractiveness, paying special attention to the importance of institutional efficiency. Then, we discuss FDI inflow into Central and Eastern European countries and select diagnostic variables that will later be used as the basis for the construction of a synthetic index of institutional quality (SIIQ). By composing a ranking of countries based on estimated values of the index, we could identify countries of similar institutional quality. In the last stage we analyse the correlation between SIIQ in individual countries and FDI inward stock as % of GDP. At the end we present conclusions.






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