Влияние на корупционната среда върху динамиката на преките чуждестранни инвестиции в условията на присъединяване и членство в еврозоната
The Impact of the Corruption Environment on the Dynamics of Foreign Direct Investment in the Context of Accession and Membership in the Eurozone

Author(s): Vladimir Tsenkov, Galya Vladimirova
Subject(s): Politics / Political Sciences, Politics, Economy, Supranational / Global Economy, Economic policy, EU-Approach / EU-Accession / EU-Development, Corruption - Transparency - Anti-Corruption
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: corruption environment; foreign direct investments; anti-corruption indices
Summary/Abstract: The empirical study aims to use the Granger causality test to verify the existence of mutual determinism between the dynamics of foreign direct investment (FDI) in the periods before and after the accession to the Eurozone of a selected group of countries and a set of five indices, calculated annually using World Bank methodology, which reflect relevant indicators of governance related to both the corruption climate and efforts at the state level to combat corruption. The practical experience of the countries studied (Estonia, Cyprus, Latvia, Lithuania, Malta, Slovakia, and Slovenia), which joined the Eurozone between 2007 – 2015, allows immediate conclusions to be drawn about the impact of the corruption environment on the dynamics of foreign direct investment, divided into inflows and outflows, within two periods of equal duration before and after the adoption of the single European currency. The empirically established distinction between the impact of different corruption indices on incoming and outgoing FDI flows makes it possible not only to classify them according to the degree of their impact, but also to clearly distinguish the change that occurred as a result of joining the Eurozone. While in the pre-accession period the most significant impact on FDI inflows was exerted by the indicators of Political Stability and Government Effectiveness, after joining the Eurozone the indicators of Rule of Law and Regulatory Efficiency came to the fore. In the same context of analysis, we can point out that while before the adoption of the single European currency, the rule of law and regulatory efficiency were the leading indicators for FDI outflows, after joining the Eurozone, the decision to withdraw investments from the countries studied is determined to a significantly lesser extent by the direct impact of corruption indicators, but rather on the basis of economic and market expediency.

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