Abstract:

This paper aims to investigate the factors influencing foreign direct investment (FDI) inflows. The study examines several key variables, including Gross Domestic Product (GDP), distance, FDI inflow, percentage of manufacturing value-added, inflation rate, real interest rate, and the index of Economic Freedom. The gravity model analyzes the potential relationships between these independent variables and FDI inflows. Utilizing a logarithmic function, we explore the extent to which FDI inflows are associated with the other variables. The data utilized in this analysis are obtained from reputable sources such as the World Bank and the International Monetary Fund (IMF). The findings reveal a statistically significant relationship between the dependent variable (FDI inflows) and the independent variables.

Keywords:

Balkan region, distance, foreign investment, GDP, gravity model, gross capital formation, inflation rate, labor force.

JEL Classification:

JEL Classification : E1, E10, E17.

How to Cite:

Bajram Korsita, Luftim Cania, Armira Lazaj and Llambi Prendi. An Application of the Gravity Model: Exploring Foreign Direct Investment in the Balkan Region. [ref]: vol.21.2023. available at: https://refpress.org/ref-vol21-a219/