Does economic convergence with the European Union mean more FDI flows to an economy? Analysis on 5 Central and Eastern Europe countries

Abstract

In this paper we analyze the relationship between economic convergence with the European Union (EU) and foreign direct investment flows to 5 EU countries (Bulgaria, Czech Republic, Poland, Romania and Hungary) in the period 2001 – 2010, in order to determine if the process of economic convergence with the EU level influences FDI inflows in these economies. We use an economic convergence index, made up of real and structural convergence indexes, to assess the level of economic convergence. The study does not provide us with a clear response to our question. We report a tight relationship between convergence index and FDI inflows in Bulgaria, but quite divergent evolutions of the two variables in the case of Hungary.convergence index; foreign direct investments; European Union