Determinants of Foreign Direct Investment in Cyprus
Determinants of Foreign Direct Investment in Cyprus

Summary/Abstract: Foreign direct investment (FDI) is considered one of the main causes of economic development and growth in host countries, and it has followed an increasing trend over recent decades. Identifying the factors instrumental in attracting foreign direct investment policy in various countries, especially in developing countries, which have failed to make good use of this factor, can be useful. The present study was an attempt to investigate factors influencing FDI in Cyprus as one of the developing countries in Europe. The data were collected during 1995-2015 period. The hypotheses were estimated using the vector error correction model. The results demonstrated that rate of capital return, degree of economic openness, liquidity, tax rate; market size, infrastructure, human capital, and economic growth rate have a significant effect on foreign direct investment in Cyprus. However, other independent variables, i.e. government expenditure, inflation rate, and exchange rate do not have a significant effect on foreign direct investment.

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