What Moves Capital to Transition Economies?

Between 1991 and 1999, capital flows to 25 transition economies in Europe and the former Soviet Union differed widely in terms of overall levels and the share and composition of private flows. With some exceptions (notably Russia), the main form of private inflows was foreign direct investment. Portfolio investment was volatile and concentrated in a handful of countries. Regressions show that direct investment can be well explained in terms of economic fundamentals, whereas the presence of a financial market infrastructure and a property-rights indicator are the only explanatory variables that seem to have had a robust effect on portfolio investment.Transition economies;Capital flows;Foreign direct investment;direct investment, portfolio investment, investment flows, investment restrictions, investors, foreign investors, investment decisions, direct investment inflows, foreign participation, inward foreign direct investment, macroeconomic stability, portfolio investments, real interest rates, private capital, external financing, investment portfolio, foreign capital, foreign investment, fdi, private investment, investment regulations, institutional development, international investment, foreign investor, foreign exchange, international finance, foreign investments, investment securities, foreign direct investments, direct investments, investment projects, macroeconomic indicators, manufacturing sector, private foreign investors, regulatory framework