The Effects of Transition and Political Instability on Foreign Direct Investment Inflows: Central Europe and the Balkans

40 Pages Posted: 10 Feb 2005

See all articles by Josef C. Brada

Josef C. Brada

Arizona State University (ASU) - Economics Department

Ali M. Kutan

Southern Illinois University at Edwardsville

Taner M. Yigit

Bilkent University - Department of Economics

Date Written: November 2004

Abstract

This paper examines the effect of transition and of political instability on FDI flows to the transition economies of Central Europe, the Baltics and the Balkans. We find that FDI to transition economies unaffected by conflict and political instability exceed those that would be expected for comparable West European countries. Success with stabilization and reform tends to increase FDI inflows. In the case of Balkan counties, conflict and instability have reduced FDI inflows below what one would expect for comparable West European countries, and reform and stabilization failures have further reduced FDI to the region. Thus the economic costs of instability in the Balkans have been quite high.

Keywords: Foreign direct investment, transition, political instability, political risk

JEL Classification: F21, F23, P52

Suggested Citation

Brada, Josef C. and Kutan, Ali M. and Yigit, Taner M., The Effects of Transition and Political Instability on Foreign Direct Investment Inflows: Central Europe and the Balkans (November 2004). Available at SSRN: https://ssrn.com/abstract=665122 or http://dx.doi.org/10.2139/ssrn.665122

Josef C. Brada (Contact Author)

Arizona State University (ASU) - Economics Department ( email )

Box 873806
Tempe, AZ 85287-3806
United States
602-965-6524 (Phone)
602-965-0748 (Fax)

HOME PAGE: http://www.mesharpe.com/eee_main.htm

Ali M. Kutan

Southern Illinois University at Edwardsville ( email )

Department of Economics and Finance AH-3141
Edwardsville, IL 62026-1102
United States
618-650-3473 (Phone)
618-650-3047 (Fax)

HOME PAGE: http://https://ideas.repec.org/e/pku30.html

Taner M. Yigit

Bilkent University - Department of Economics ( email )

06533 Ankara
Turkey

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