International Economics

<< N°168

  N°168  
Issue Q4 2021  
Economic sentiment indicators and foreign direct investment: Empirical evidence from European Union countries  
Andrzej Cie?lik
Mahdi Ghodsi
 
This paper studies the role of business sentiment in the decisions of multinational enterprises (MNEs) to undertake foreign direct investment (FDI) across European Union (EU) member states. Based on the knowledge-capital model, the study employs the Pseudo Poisson Maximum Likelihood (PPML) estimator and panel data to examine empirically the determinants of FDI across EU member states during the period 2003–2017. The empirical evidence suggests that better economic sentiment in an EU Member State induces MNEs to undertake FDI in that country, while worse economic sentiment in an EU member state motivates an MNE in that country to invest abroad.
Abstract

   
Economic sentiment ; Factor endowments ; Foreign direct investment ; Multinational enterprise ; Market size ; EU Member states ; Keywords
F21 ; F23 ; JEL classification
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