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dc.contributor.authorJungnickel, Rolfen_US
dc.contributor.authorBorrmann, Christineen_US
dc.contributor.authorKeller, Dietmaren_US
dc.description.abstractThe tradition of gravity models is in the analysis of trade flows with market size andgeographic or economic distance as core variables. Both these variables can be importantdeterminants of FDI, too. However, when such models are used to explain FDI,there can be differences in the mode of operation of these variables so that the interpretationcan become uncertain. Market size can reach beyond the host country and distancecan be an incentive as well as an impediment to FDI.In the present paper, we use gravity-type models in order to assess the level of GermanFDI in CEE countries, distinguishing between the four nearby core countries and theother six EU accession countries. Estimates are done both on the basis of an in-sampleas well as an out-of-sample approach on the basis of FDI in 81 important host countries.From the various specifications it becomes obvious that (1) beside the size of the hostcountry, the market potential of neighboring countries is an important determinant ofthe regional structure of German FDI, and (2) the costs of operating at a distance seemto be weighted higher than the advantage of being close to distant markets. Geographicdistance seems to be more important than various measures of economic distance. Onthe whole, gravity-type models seem to be appropriate to explain the regional structureof FDI. However, the results should be interpreted with caution given the extremelywide confidence intervals of the estimates which is a feature of former studies, too.en_US
dc.publisher|aHamburg Institute of International Economics (HWWA) |cHamburgen_US
dc.relation.ispartofseries|aHWWA Discussion Paper |x328en_US
dc.subject.keywordForeign Direct Investmenten_US
dc.subject.keywordGravity Modelen_US
dc.subject.keywordTransformation Countriesen_US
dc.titleWhat gravity models can tell us about the position of German FDI in Central and Eastern Europeen_US
dc.typeWorking Paperen_US

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