This paper examines theoretically and empirically the extent to which the decision by foreign firms to invest in a group of countries is influenced by economic factors, as opposed to political risk and institutional performance. We consider the importance of these factors as drivers of foreign direct investment (FDI) for 32 European countries (subsequently divided into three pooled clusters) by means of panel regression techniques in two specifications over the 1995-2008 period. Our results suggest that risk and institutional factors considered in both static and dynamic perspectives significantly influence the behaviour of investors. Policies and institutions that vary widely between countries modify their decision-making, so that the purely economic factors have different statistical significance and impacts on the intensity of FDI, as was revealed by clustering countries into three groups according to levels of economic maturity. Additionally, not all factors of risk have an identical impact on FDI decisions in particular groups of countries. However, we find that as measures of political risk, monetary discipline, low regulation, effective government and good education prove to be highly significant for most country groupings. All of these measures reduce political risk and positively affect the level of FDI.Keywords: FDI; Political risk; Economic institutions; Panel regression; European Union. JEL: F2; D81; C23Acknowledgements: The authors are grateful for the financial support of the Grant Agency of the Czech Republic no. P402/12/0982 and for seed funding from the University of Limerick, which were used for this study. Highlights:• We compare 16 factors influencing FDI entry into three groups of countries.• Institutional and risk factors are important complements to economic factors.• The estimation is by static and dynamic specification of pooled panel data.• There is a high difference between static and dynamic decision-making of investors.• Importance of institutions rises with the degree of economic immaturity of recipients.

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The disintegration of the USSR brought with it a turbulent period of transition for the newly emerged independent states. This initiated a process of economic decentralisation and a re-allocation of resources. Various regional formations aiming to create a single market or even a common currency area have been proposed amongst the former Soviet states. Despite this, very little in terms of economic integration has been achieved so far. Economies within the CIS are divergent in terms of size and economic structure, with external shocks being more prominent for regional countries. The empirical analysis provided here examines the sustainability of optimum currency area arrangements within the CIS. The results present weak evidence to support monetary arrangements in the region, nonetheless some evidence was found for Russia-Belarus and to some extent Russia-Kazakhstan. Russia remains the dominant, most diversified and advanced economy in the region. In the case of a monetary union with regional countries, the union is likely to happen by absorption. External shocks have divergent effects on regional countries; the differences to a large extent are attributed to the magnitude of responses, further weakening the argument in favour of the OCA in the region.Optimum currency area, CIS, integration,

The current paper presents an empirical analysis of the current account positions during the pre Asian crisis period, in the four most crisis-hit countries (namely Thailand, the Philippines, South Korea and Indonesia). We have employed the procedures advocated by Husted for the presence of stationarity in current accounts by estimating a cointegration relationship between any country's exports and imports. The results do not substantiate the presence of cointegration between the series, implying that the macroeconomic fundamentals in these countries prior to the crisis were far from robust, at least from the perspective of current account sustainability. Copyright 2007 Blackwell Publishing Ltd