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Volume 68, Issue 3

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Trick or Treat? The Effect of IMF Programmes on Mobilising FDI in CESEE Countries

Andrijić, Marijana; Barbić, Tajana

Year: 2018   Volume: 68   Issue: 3   Pages: 245-267

Abstract: This paper investigates the effect of IMF programmes on foreign direct investment in the countries of Central, Eastern and South-eastern Europe. We use original dataset for 17 countries in the region in the period from 1990 to 2013. In order to address selection bias stemming from the fact that countries are not randomly assigned to participation in IMF arrangements in a given year and controlling also for the unobservable factors influencing both IMF participation and foreign investment we employ treatment effect model. The robustness of our findings was additionally assessed by fixed effects instrumental variable panel and Arellano Bond dynamic panel estimation. Irrespective of the method used and model specification, we find that IMF arrangements negatively affect foreign direct investment in the CESEE region.

JEL classification: F33, F21, F59, G01, P2

Keywords: FDI, IMF, catalytic finance, CESEE countries, treatment effect

RePEc: https://ideas.repec.org/a/fau/fauart/v68y2018i3p245-267.html

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