Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe
This paper empirically examines short- and long-run relationships between foreign direct investments (FDI) and volatility of foreign portfolio investments (FPI) in 12 Central and Eastern European (CEE) countries. We use the Generalized Autoregressive Conditional Heteroskedasticity models to calcula...
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| Format: | Article |
| Language: | English |
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EconJournals
2014-05-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | http://mail.econjournals.com/index.php/ijefi/article/view/797 |
| _version_ | 1797918283440062464 |
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| author | Yaman O. Erzurumlu Giray Gozgor |
| author_facet | Yaman O. Erzurumlu Giray Gozgor |
| author_sort | Yaman O. Erzurumlu |
| collection | DOAJ |
| description |
This paper empirically examines short- and long-run relationships between foreign direct investments (FDI) and volatility of foreign portfolio investments (FPI) in 12 Central and Eastern European (CEE) countries. We use the Generalized Autoregressive Conditional Heteroskedasticity models to calculate volatility of the FPIs. We utilize the second generation panel unit root test, panel-Wald causality test procedure and panel cointegration analysis allowing for structural breaks, and cross-sectional dependence. The results strongly suggest that a decrease in FPI volatility is followed by an increase in FDI in the long-run, and this indicates economies that advance in capital liberalization benefit from increases in FDI. However, the relationship in opposite direction in the long-run is valid in only half of the countries studied. In short-run, we observe that the former relationship is valid only in Turkey, the Czech Republic, and Lithuania; where the latter is valid only in Latvia.
Keywords: Central and Eastern European economies; foreign direct investment; foreign portfolio investment; volatility models; panel data estimation techniques
JEL Classifications: C50; F21; F32
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| first_indexed | 2024-04-10T13:27:07Z |
| format | Article |
| id | doaj.art-a2e6de669ea8451ab3017f10ca88fa19 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T13:27:07Z |
| publishDate | 2014-05-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-a2e6de669ea8451ab3017f10ca88fa192023-02-15T16:11:49ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382014-05-0143Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern EuropeYaman O. Erzurumlu0Giray Gozgor1Bahcesehir UniversityDogus University This paper empirically examines short- and long-run relationships between foreign direct investments (FDI) and volatility of foreign portfolio investments (FPI) in 12 Central and Eastern European (CEE) countries. We use the Generalized Autoregressive Conditional Heteroskedasticity models to calculate volatility of the FPIs. We utilize the second generation panel unit root test, panel-Wald causality test procedure and panel cointegration analysis allowing for structural breaks, and cross-sectional dependence. The results strongly suggest that a decrease in FPI volatility is followed by an increase in FDI in the long-run, and this indicates economies that advance in capital liberalization benefit from increases in FDI. However, the relationship in opposite direction in the long-run is valid in only half of the countries studied. In short-run, we observe that the former relationship is valid only in Turkey, the Czech Republic, and Lithuania; where the latter is valid only in Latvia. Keywords: Central and Eastern European economies; foreign direct investment; foreign portfolio investment; volatility models; panel data estimation techniques JEL Classifications: C50; F21; F32 http://mail.econjournals.com/index.php/ijefi/article/view/797 |
| spellingShingle | Yaman O. Erzurumlu Giray Gozgor Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe International Journal of Economics and Financial Issues |
| title | Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe |
| title_full | Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe |
| title_fullStr | Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe |
| title_full_unstemmed | Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe |
| title_short | Co-movement of Foreign Direct and Portfolio Investments in Central and Eastern Europe |
| title_sort | co movement of foreign direct and portfolio investments in central and eastern europe |
| url | http://mail.econjournals.com/index.php/ijefi/article/view/797 |
| work_keys_str_mv | AT yamanoerzurumlu comovementofforeigndirectandportfolioinvestmentsincentralandeasterneurope AT giraygozgor comovementofforeigndirectandportfolioinvestmentsincentralandeasterneurope |