Inflow of foreign direct investments in Russia's regions: potential and risk factors

Inflow of foreign direct investments in Russia's regions: potential and risk factors

Автор: Izotov Dmitrii A.

Журнал: Economic and Social Changes: Facts, Trends, Forecast @volnc-esc-en

Рубрика: Regional economy

Статья в выпуске: 2 (62) т.12, 2019 года.

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The Russian economy is closely integrated with the world capital market and at the same time possesses visible regional differences in the dynamics of foreign direct investment (FDI). The goal of our research is to carry out quantitative assessment of the factors that promote the inflow of FDI to Russia's regions in 2011-2017 within the framework of aggregated and private indicators of risk and potential. The estimates we have obtained indicate that the aggregate investment potential has a positive impact on FDI inflows to the regions. We find out that as the risks for the domestic economy increase, the statistically significant inverse correlation between FDI inflows and the aggregate investment risk index ceased to be observed since 2014, alongside the remaining visible convergence between Russia's regions on this indicator. Our estimates suggest that without overcoming the high risks generated by the national economy as a whole, the reduction in aggregate risks between Russia's regions does not play a significant part in increasing FDI inflows. In accordance with our assessment, we determine that the regional dynamics of FDI inflows in 2011-2017 was explained by some private indicators of investment risk and potential, which, in general, had a reverse and direct impact on the dependent variable, respectively. The specific characteristics of Russia's regions significantly adjusted the importance and the ratio of FDI attraction factors, so the obtained values of the corresponding elasticities indicated a difference rather than a commonality of private indicators of risk and potential, the indicators that drive the inflow of direct investment to the Far East compared to other regions of Russia. This fact probably confirms the need for differentiated policies to attract FDI to the economy of the Far East in comparison with other regions. Since our research reflects the relative impact of risk and potential factors on FDI inflows for Russia's regions that exist in the single institutional and economic space, the estimates we have obtained can be supplemented by a more detailed study of the role of Russia's potential and risk compared to other national economies.

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Foreign direct investment, investment potential, investment risk, aggregate and private indicators, elasticity, fixed effects, Russia, region, far east

Короткий адрес: https://sciup.org/147224170

IDR: 147224170   |   DOI: 10.15838/esc.2019.2.62.3

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