Foreign Direct Investment (FDI) In Bulgaria (2014)
Foreign Direct Investment (FDI) has increasingly become a key aspect of economic growth in the last two decades, aiding globalization and improving growth prospects on the back of influx of foreign funds into domestic assets. The current study focuses on examining the FDI determinants of Bulgaria, a member country of the European Union (EU) and located in Southeastern Europe. As an emerging economy that joined the EU in 2007 (Europa.eu, n.d.), Bulgaria grew primarily due to the privatization policies undertaken by the government (Marketline, 2013). The study is organized as follows.
Chapter one gives the introduction and key objectives of the study. Chapter two is on the literature review and focuses on FDI by outlining the definition, its importance to emerging economies and relevance to Bulgaria’s economic growth. Some important macroeconomic indicators of Bulgaria are discussed in addition to characteristics and trends of FDI alongside various theories applicable to analyzing FDI. Chapter three digs deep into the gravity model and studies its framework which can be applied to analyzing Bulgaria’s FDI determinants in the subsequent section. Also, the framework of FDI is studied and further correlated with that of the gravity model.
Chapter 4 details the research methodology by analyzing FDI inflows into Bulgaria by dissecting its economic data further and focuses on key variables in the FDI equation and their relevance to the study. Variables that are used in the study include market seeking variables such as Gross Domestic Product (GDP) and its growth and population and its growth, resource seeking variables such as labor costs and efficiency seeking variables such as inflation, external debt and the openness of the economy to FDI.
Other relevant variables include privatization, sectorial development in key sectors such as financial, cultural factors, political aspects and other macroeconomic factors such as inflation rate, exchange rate, interest rate and government budget. The gravity model is then applied using panel data from 2004 to 2012 to determine the importance of various FDI determinants in the EU and Bulgaria. Chapter 5 provides a detailed discussion of the study, draws key conclusions and outlines the study limitations before listing out suggestions for future study.
- 10,000 words – 42 pages in length
- Good use of literature
- Good use of statistical analysis
- Well written throughout
- Ideal for international Finance students
2. Literature Review
Different types of FDI
Theories on FDI
FDI theory based on industrial organization by S.H. Hymer
Substitute theory of FDI for trade by Robert Mundell in 1968
International production life cycle theory by Raymond Vernon
Theory of exchange rates on imperfect capital markets by Itagaki and Cushman
Ownership, location and Internationalization (OLI) theory by Professor Dunning
3. Gravity model and its Role in Determining FDI Prospects
Theory of gravity model
Framework of FDI and gravity model
Data sample of Bulgaria
Measuring FDI inflows using empirical gravity model
5. Empirical Results and Associated Discussions
Gravity model analysis results by country
Relevance of findings to Bulgaria’s FDI trends (UNCTAD, 2013)
Policy implications on FDI
Limitations of the study
Suggestions for further study