engleski

Foreign Direct Investment and Stock Markets Development in CEE Countries

The foreign direct investment (FDI) in CEE countries has grown rapidly in recent years. Relevant literature suggest that an increase of FDI flows was facilitated mainly by structural reforms undertaken by host country, including strengthening of macroeconomic stability, privatization, capital account liberalization and tax incentives. Development of financial markets has also played a remarkable role in attracting FDI. However, the aim of this paper is to explore what effect have foreign direct investment had on stock markets of selected CEE countries, i.e. whether foreign investment have fostered further development and deepening of stock markets. Long- and short-run relationships between FDI inflow and stock market development are to be tested using Johansen cointegration method and Granger causality test, respectively.

FDI; stock markets; cointegration; Granger causality

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