The determinants of FDI and the impact of the economic crisis on the implementation of RTAs: A static and dynamic gravity model

Abstract

Foreign Direct Investment has become one of the major challenges for the countries who participated in international economy. It affects the host country by increasing its national income, labor productivity and employment. It also has some spillover effects, including technology transfer, new management and modern production techniques. This work develops a static and dynamic gravity model to test the determinants of FDI between 14 investment partners and 39 host countries during the period 1990-2011 and evaluate the impact of the recent economic crisis on FDI. Our empirical estimates take into account the endogenous nature of the effects of integration and the existence of the dynamic effect.