A Gravity Model Analysis of FDI across EU Member States

IntroductionFor years, the European Union (EU) has been the largest destination for foreign direct investment (FDI).At the same time, it has been the leading outflow investor in the world, accounting for more than one third (35%) of the world's inflows and about two fifths (41%) of global outflows.According to OECD data, since 2018 FDI to the EU declined in line with the downward trajectory of global investment.However, the EU's share of global FDI inflows is always stable and accounted for 22%-23% in 2017-2018.While FDI flows to the EU as a whole decreased, investment in the new EU member states (NMS) increased by an average of 10% in 2016-2018 (Figure 1).In fact, since Poland, Hungary, the Czech Republic, and other Central and Eastern European Countries (CEECs) joined the EU in 2004, FDI inflows rose sharply, reaching almost $49 billion in 2018.Seemingly, NMS stand to benefit from joining the EU, making EU membership one of the most influential FDI determinants.