Since 2014
The Gravity Model on EU Countries – An Econometric Approach
European Journal of Sustainable Development
View Archive Info| Field | Value | |
| Title |
The Gravity Model on EU Countries – An Econometric Approach
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| Creator |
Marku, Megi; “Aleksander Xhuvani” University, Faculty of Economics, Elbasan, Albania.
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| Description |
Foreign Direct Investment, play a huge role in the growth of the global businesses. They can provide to a firm, new markets where the firm can operate, new marketing channels,manufacturing facilities, access to technology and to the products, and they also provide techniques and funds previously unknown. For the host country, this source of technologies, capital, processes, techniques, and managerial skills can provide an important impetus to the economic development of the country. Through this study, it has been analyzed how FDI are affected by the distance and by the economic size of the country.Given that such a gravity model (size and distance) on FDI already exists, this research has examined particularly the impact of these two factors on FDI of the EU member states.Through an econometric model it has been examined how economic size and distance affect foreign investment of EU leading countries in some of the world states and whichof two factors have had the greatest impact. The hypothesis raised in this paper is related to the fact that the gravity model with its factors is extremely important for the volume ofFDI, the size playing a more important role than the distance. By using statistical judgment and econometric analysis it has been explored if the hypothesis rose above, is statistically valid or not. From the model resulted that the impact of the size coefficient on FDI is 0.0042 million Euros, while the distance coefficient is – 0.36 millions. It shows that with the increase of GDP and the distance between countries, FDI increase and decreaserespectively with the above coefficients. According to statistical methods of control, economic size was a more determinant factor than the distance, giving us the idea that in recent years with the increased role of globalization the importance of distance hassignificantly decreased. In this paper it is recommended the gravity models should consider a lot other factors besides size and distance.JEL classification: A1, C01, C12, C31, C51, F21Keywords: FDI, international trade, gravity model, EU countries, econometric model.
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| Publisher |
European Center of Sustainable Development
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| Contributor |
—
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| Date |
2014-10-01
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion — |
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| Format |
application/pdf
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| Identifier |
http://www.ecsdev.org/ojs/index.php/ejsd/article/view/147
10.14207/ejsd.2014.v3n3p149 |
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| Source |
European Journal of Sustainable Development; Vol 3, No 3; 149-158
2239-6101 2239-5938 |
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| Language |
eng
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| Relation |
http://www.ecsdev.org/ojs/index.php/ejsd/article/view/147/140
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| Rights |
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.Authors of articles published in the European Journal of Sustainable Development retain copyright on their articles. Authors are therefore free to disseminate and re-publish their articles, subject to any requirements of third-party copyright owners and subject to the original publication being fully cited. The ability to copy, download, forward or otherwise distribute any materials is always subject to any copyright notices displayed. Copyright notices must be displayed prominently and may not be obliterated, deleted or hidden, totally or partially.
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