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Abstract

The study collects factors that affect FDI and tests their impact on 11 countries of
Eastern Europe. The tested determinants were selected from previously published
materials in order to establish which ones have a greater impact on FDI at this
particular region. The study is important in that it provides a wide analysis on why
some countries are more successful in attracting and taking advantage of FDI and
gives recommendations to other less successful countries.

A correlation test was run to indentify the variables which were most often correlated
to FDI and then a regression model was built to determine which variables explained
better the variance of FDI. Different patterns were recognised between the countries
where the relationship between FDI and GDP growth was significant and the
countries where it was not, such explaining why some countries have been
successful in attracting FDI and benefiting from them and why others have not been
able to attract investments or simply could not take advantage of them. The adopted
research approach was selected because it provides useful information on both
national and regional level.

The study found that the relationship between FDI and GDP growth was strong in
Bulgaria, Poland and Romania. The main conclusions drawn are that market size,
GDP per capita, and accessibility to credit were more often correlated with FDI while
market size, openness to trade and R&D best explained the variance of FDI. Having
low figures in most economic and political indicators, Albania, B&H and FYR of
Macedonia were unable to attract significant level of investments. The findings
provide evidence that countries with higher income per capita, tend to have a lower
number of variables correlated with FDI and lower chances to benefit from FDI.

The data used were collected from reputable national and international bodies for an
11-year period. The time frame was restricted by the data availability. In order to
reach more robust conclusions, the dissertation recommends that future research
should use a larger sample and data set in a longer time period.

Key words: Foreign Direct Investments, GDP Growth, Eastern Europe.