K is jánsdó i , Helga; Óska sdó i , S e anía
A icle
Eu opean FDI in I eland and Iceland: Be o e and a e he
inancial c isis
Jou nal o Risk and Financial Managemen
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Jou nal o
Risk and Financial
Managemen
A icle
Eu opean FDI in I eland and Iceland: Be o e and a e he
Financial C isis
Helga K is jánsdó i 1,* and S e aníaÓska sdó i 2


Ci a ion: K is jánsdó i , Helga, and
S e aníaÓska sdó i . 2021. Eu opean
FDI in I eland and Iceland: Be o e
and a e he Financial C isis. Jou nal
o Risk and Financial Managemen 14:
23. h ps://doi.o g/10.3390/
j m14010023
Recei ed: 9 No embe 2020
Accep ed: 25 Decembe 2020
Published: 6 Janua y 2021
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1Facul y o Business Adminis a ion, Uni e si y o Aku ey i, Bo gum, No ðu slóð 2, 600 Aku ey i, Iceland
2Facul y o Poli ical Science, Uni e si y o Iceland, 102 Reykja ík, Iceland; [email p o ec ed]
*Co espondence: [email p o ec ed]
Abs ac :
This pape analyses Fo eign Di ec In es men (FDI) in es men in I eland and Iceland om
o he Eu opean coun ies du ing wo pe iods, i.e., he p e- inancial c isis pe iod o 2000–2007 and he
inancial c isis pe iod o 2008–2010. The aim o his esea ch is o de e mine wha made he coun ies
in e es ing o o eign in es o s in bo h good and bad imes; and, secondly, o examine whe he
Eu opean Union membe ship (and he Eu o) made a di e ence in his espec . The esul s we e
ob ained by using da a om he OECD, he Wo ld bank, and o he sou ces. The model cons uc ed
o he s udy applies he in e se hype bolic sine ans o ma ion o he g a i y model, which is a
no el app oach. The esul s demons a e ha be o e he inancial c isis o 2008, Eu opean Union
(EU) membe ship did no help I eland a ac mo e FDI om o he EU coun ies. Howe e , once
i had been hi by he c isis, I eland a ac ed mo e FDI om o he EU coun ies. Iceland, on he
o he hand, which is no an EU coun y, a ac ed FDI om non-EU coun ies a he han om EU
coun ies be o e he inancial c isis. A e he c isis, howe e , he o igin wi hin Eu ope, o FDI in
Iceland had no signi ican e ec on he low o FDI in o he coun y.
Keywo ds:
Eu opean Union (EU); Fo eign Di ec In es men FDI; T ade Blocs; EFTA; In e na ional
Mone a y Fund (IMF)
1. In oduc ion
This pape analyses Fo eign Di ec In es men (FDI) in es men in I eland and Iceland
om o he Eu opean coun ies du ing wo pe iods, i.e., he p e- inancial c isis pe iod o
2000–2007 and he inancial c isis pe iod o 2008–2010. The aim o his esea ch is o
de e mine wha made he coun ies in e es ing o in es o s in bo h good and bad imes;
and, secondly, o examine whe he Eu opean Union (EU) membe ship (and he Eu o) made
a di e ence in his espec . Be o e deciding whe he o in es long e m in ano he coun y,
in es o s ake a ious economic and poli ical ac o s in o conside a ion. In his pape we
look a some o hese ac o s o see which ma e ed he mos . They include he isk o
poli ical ins abili y, go e nmen e iciency, coun y endowmen s, coun y c edi a ing,
in es men isk, cul u al dis ance and ade-bloc membe ship. The ecen exi o B i ain
om he Eu opean Union (EU 2020), Eu o skep icism in a ious pa s o Eu ope, as well as
he ecen economic down u n in Eu ope due o Co id-19, indica e ha he e a e lessons
o be lea n om his esea ch o o he small and medium sized economies. Da a on FDI
om he OECD (2020) was used o he analysis.
Be o e explaining in u he de ails he design o he s udy, he da a and he esul s,
a ew wo ds a e wa an ed o explain why compa ing I eland and Iceland is in e es ing.
Al hough I eland and Iceland ha e some hings in common, hey also di e in some ways
(EU 2020;EFTA 2020). The g ea es poli ical-economic di e ence be ween he wo coun ies
is ha I eland belongs o he EU and has adop ed he Eu o while Iceland has no . Bo h
coun ies a e small island s a es wi h open economies (Wo ld Bank 2020). O he wo,
Iceland has a much smalle popula ion han I eland, some 360.000 compa ed o I eland’s
J. Risk Financial Manag. 2021,14, 23. h ps://doi.o g/10.3390/j m14010023 h ps://www.mdpi.com/jou nal/j m
J. Risk Financial Manag. 2021,14, 23 2 o 12
almos i e million inhabi an s (Wo ld Bank 2020). Bo h coun ies ha e a ela i ely well-
educa ed labo o ce and good li ing s anda ds (Wo ld Bank 2020;OECD 2020). Thus
in 2007 he GDP pe capi a in Iceland was
€
50,500 compa ed o
€
44,820 in I eland (IMF
2020). Addi ionally, being small open economies bo h coun ies depend hea ily on expo s
and impo s (K ugman 1991). As a esul , ade is e y impo an o bo h coun ies.
Howe e , as has al eady been poin ed ou , hey ha e aken di e en pa hs when i comes
o membe ships in ade alliances (EU 2020;EFTA 2020).
I eland was one o he ounding membe s o he Eu opean F ee T ade Ag eemen
(EFTA), es ablished in 1960. In 1973 I eland joined he Eu opean Communi y (EC) along
wi h B i ain and Denma k, which in 1993 became he Eu opean Union (EU). Iceland, on he
o he hand, joined he EFTA in 1970 (EFTA 2020). In 1994 he emaining EFTA coun ies
(Iceland, No way and Lich ens ein) and he EU es ablished he Eu opean Economic A ea
(EEA) which secu es he ee mo emen o goods, capi al, labo , and se ices wi hin he
Eu opean single ma ke , al hough wi h some excep ions (EU 2020). Fo example, in he
case o Iceland, o eign owne ship o companies in he, locally impo an , ishing sec o
canno exceed 49%.
When he Eu o came in o exis ence in 1999, many o he EU coun ies adop ed i as
hei cu ency, including I eland. In compa ison, Iceland kep i s small cu ency (K óna,
ISK) and emained ou side he EU. By no joining he EU, Iceland s ayed ou o he EU’s
Common Fishe ies Policy, he Common Ag icul u al Policy, as well as he majo EU
ins i u ions. By keeping i s cu ency, Iceland e ained ull con ol o e i s mone a y policy.
Since 2002 he alue o he Icelandic K óna (ISK) has been de e mined by he o ces o
supply and demand ( loa ing cu ency), managed by he Icelandic Cen al Bank (ECB
2020), which enjoys au onomy om he go e nmen .
In he yea s leading up o he inancial c isis o 2008, bo h Iceland and I eland saw
high in lows o o eign capi al and in es men (Wo ld Bank 2020;IMD 2020;K is jánsdó i
2010;Ma kusen 2004). In he case o Iceland, high domes ic in e es a es and cheap o eign
loans had con ibu ed o some o his in low. Howe e , once conce ns g ew abou he
iabili y o he Icelandic banking sys em, capi al ligh began (IMF 2020;OECD 2020). Wi h
a sh inking supply o o eign cu encies, coupled wi h a g ea demand o hem, he alue
o he ISK d opped by some 50% in 2008. The Icelandic s a e also p o ed unable o sa e i s
majo banks, which hen iled o bank up cies in Oc obe 2008. The esul ing economic
c isis di ec ly impac ed i ms as well as he public, ueling poli ical un es as well (e.g.,
Benedik sdó i e al. 2011;Óska sdó i 2013). Iceland en e ed an IMF p og am in 2008
(Gissu a son 2010;IMF 2018). In con as , I eland, as a membe o he Eu o-zone, was able
o ge help om i s Eu opean allies wi h e- inancing i s banks, hus sa ing hem om a
collapse. Howe e , in u n, i s public deb ose apidly as did unemploymen due o he
impac o he inancial c isis (e.g., Riain 2012;OECD 2020).In Iceland, he cu ency c isis
con ibu ed o he decision o he Icelandic go e nmen o apply o EU membe ship in
2009, wi h he aim o joining he Eu o-zone (ECB 2020). Fo a ew yea s, he ques ion o EU
membe ship domina ed he poli ical discou se in Iceland (e.g., Tho hallsson and Rebhan
2011). Howe e , a new go e nmen coali ion ha came in o powe in 2013, decided o
wi hd aw he EU applica ion, wi h he a gumen ha i bes se ed Iceland’s in e es s o
emain ou side o he EU and no adop ing he Eu o (Gua dian 2015).
As he esul s will show, his migh ha e been he igh call. Be o e he inancial c isis
o 2008, EU membe ship did no help I eland a ac mo e FDI om o he EU coun ies.
Howe e , once he c isis had hi I eland, EU membe ship seems o ha e made a di e ence
in ha i a ac ed FDI om o he EU coun ies. Iceland, on he o he hand, a ac ed FDI
om non-EU coun ies a he han EU coun ies be o e he inancial c isis. A e he c isis,
howe e , he o igin wi hin Eu ope, o FDI in Iceland had no signi ican e ec on he low
o FDI in o he coun y.
The pape is s uc u ed as ollows. Sec ion 2lays ou he li e a u e e iew as i ela es
o FDI wi hin in e na ional economics. Sec ion 3p o ides desc ip ion o he model speci i-
ca ions o he g a i y model used in his s udy, in o de o bes cap u e de e minan s o
J. Risk Financial Manag. 2021,14, 23 3 o 12
FDI in Iceland and I eland, be o e and a e he global inancial c isis. Sec ion 4o e s a
desc ip ion o he da a applied in his cu en esea ch. Sec ion 5p esen s he eg ession
esul s, ob ained om es ima ing a ious g a i y model speci ica ions, unning be o e and
a e he inancial c isis. Finally, Sec ion 5p o ides a summa y and conclusions. The ind-
ings indica e ha he EU membe ship o I eland was no bene icial in a ac ing FDI om
Eu opean coun ies be o e he inancial c isis. Howe e , i had posi i e signi ican e ec s
on FDI in low a e he c isis. Addi ionally, an EU membe ship o Eu opean coun ies had
a signi ican nega i e impac on hei incen i e o unde ake FDI in Iceland be o e he c isis,
and insigni ican e ec s a e he c isis.
2. Li e a u e Re iew
New on p esen ed he g a i y model wi hin he ield o physics. Acco ding o i ,
he g a i y o ce is subjec o wo masses and how dis an hey a e om each o he
(Keesing 1998). Economis s ha e applied he g a i y model success ully in economics,
when es ima ing he de e minan s o ade in he o m o expo s and FDI (Ma kusen
2004). In e es ing p esen a ions o he g a i y model we e made by Tinbe gen (1962) and
Pöyhönen (1963).
Helpman (1984) in oduced he e ical model o FDI and Ma kusen (1984) he ho izon-
al model, accoun ing o e ical FDI and ho izon al FDI. Be gs and (1985) also p o ided a
heo e ical basis o he g a i y model and K ugman (1991) allowed o inc easing e u ns
and economic geog aphy. K ugman (2011) explained ha smalle economies end o be
less di e si ied and ely on ew main indus ies. G owing esea ch has been published
wi hin in e na ional economics on o eign di ec in es men (e.g., Ca e al. 2001;Ma kusen
2004). Fea u es o bo h he e ical and ho izon al models a e accoun ed o in a esea ch by
Ma kusen e al. (1996). This is also well documen ed in Ma kusen (2004).
Se e al s udies ha e s udied he de e minan s o o eign di ec in es men (Da ies
and K is jánsdó i 2010;Da ies e al. 2008). Some ha e looked on FDI de e minan s
in gene al (Da ies 2008) and o he speci ically on islands like Iceland (K is jánsdó i
2013). S udies ha e sough o analyze ac o s like cul u e and FDI (Ho s ede 1980,2001;
K is jánsdó i 2010,2012,2013,2016a,2016b,2017,2019a,2019b,2020;K is jánsdó i e al.
2017,2020). Resea ch has also shown ha nume ous a iables a e signi ican when i comes
o es ima ing ade lows, o eign di ec in es men and e u n on in es men (Ma kusen
2004;K is jánsdó i 2010,2012,2013,2016a,2016b,2017,2019a,2019b,2020;K is jánsdó i
and Óska sdó i 2020;K is jánsdó i and K is jánsdó i 2021).
We seek o de e mine how FDI is a ec ed like issues like GMT go e nmen e iciency
(K is jánsdó i 2016b). The da a app oach is like he one used by Da ies (2008). We apply
he G a i y model as p esen ed by Be gs and (1985) and skill di e ences as p esen ed in
he knowledge capi al model (Ca e al. 2001). Along he lines o (Zwinkels and Beugelsdijk
2010), we accoun o isk o poli ical ins abili y, go e nmen e iciency, coun y c edi
a ing, and in es men isk. Mo eo e , we accoun o cul u e based on he Ho s ede
cul u e measu e (Ho s ede 1980,2001;Ho s ede and Bond 1988;K is jánsdó i e al. 2017,
2020). Such an app oach makes i possible o es ima e impo an de e minan s o FDI
(Ma kusen 2004) in small open economies (K is jánsdó i 2020).
The con ibu ion o his s udy, wi hin in he ield o in e na ional economics, is o use
bo h economic and poli ical a iables. Because i is impo an no only o look a economic
ac o s, bu also a poli ical ac o s as well. Usually, s udies on FDI a e ocused on basic
economic ac o s, bu his esea ch inco po a es isk, c edi a ing, poli ical ins abili y, and
go e nmen e iciency.
3. Model Speci ica ion
The choice o me hod in his esea ch is based on K ugman’s inc easing e u ns
and economic geog aphy (K ugman 1991), linking economic weigh wi h dis ance in he
g a i y model se ing. Thus, he me hod in ol es usage o he g a i y model (Be gs and
1985;Ca e al. 2001) which is sui able, compa ing de e minan ac o s o FDI such as
J. Risk Financial Manag. 2021,14, 23 4 o 12
economic size (GDP) ma ke size (POP) cul u al dis ance (Ho s ede), skill di e ences, and
EU membe ship. Ou addi ional heo e ical con ibu ion is applica ion o he in e se
hype bolic sine ans o ma ion o he g a i y model (K is jánsdó i 2012). Con en ionally,
he loga i hm se es well in in he g a i y model speci ica ion. Use o he in e se hype bolic
sine ans o ma ion a he han he loga i hm ans o ma ion allows o accoun ancy o
ze os, which can be impo an in he s udy o small economies wi h limi ed da abases
(K is jánsdó i 2012). The g a i y model speci ica ion used in his s udy is based on he
speci ica ion by Be gs and (1985) in Equa ion (1). In Equa ion (1) PX is expo s om
coun y i o j, and Yi ep esen s GDP in coun y i, and Y
j
ep esen s GDP in coun y j, A
accoun s o addi ional ac o s, and he e o e m is u.
PXij =β0Yjβ1Yjβ2Dijβ3Aijβ4uij (1)
Equa ion (2) ep esen s expo s (EXP) as he dependen a iable, om coun y i o
coun y j, o e ime .
EXPij, =eγ0(Yi, )γ1Yj, γ2Dijγ3Aijγ4eζij, (2)
Equa ion (3) ep esen s he model speci ica ion, when GDP has been inse ed o Y,
DIS dis ance o D, and POP popula ion o A.
EXPij, =eς0(GDPi, )ς1GDPj, ς2(POPi, )ς3POPj, ς4DISijς5eλij, (3)
Equa ion (4) p esen s he model speci ica ion, a e aking loga i hm o all a iables.
Equa ion (4) he e o e p esen s he log-linea o ma o he speci ica ion.
lnEXPij, =ς0+ς1ln(GDPi, )+ς2lnGDPj, +ς3ln(POPi, )+ς4lnPOPj, +ς5lnDISij+uij, (4)
Table 1shows he a iables used in he s udy, and summa y s a is ics a e p esen ed in
Table 2.
Table 1. Va iable De ini ion.
FDI s ockij, FDI se ies o BOP and IIP agg ega es. Inwa d posi ion a yea -end US dolla ,
millions in hos coun y (j), o e ime ( ). OECD (2020).
GDPi,
G oss domes ic p oduc (GDP) cu en US$, in hos coun y (j). Running o e ime
( ). Wo ld Bank (2020).
POPi, Popula ion, in sou ce coun y (i) a ime ( ). IMD (2020).
SDi ij, Di e ence in he a ailabili y o skilled labo , be ween sou ce coun y (i) and hos
coun y (j) o e ime ( ). IMD (2020).
EUi, Dummy a iable accoun ing o he sou ce coun y (i) membe ship o he
Eu opean Union, o e ime ( ). Eu opean Union (EU 2020).
HOFSTEDE
iHo s ede cul u al dis ance index o he sou ce coun y (i). Aðals einsson e al.
(2011). Ho s ede and Bond (1988); Ho s ede (1980,2001).
CREDITj, The coun y c edi a ing, in he hos coun y (j), o e ime ( ). IMD (2020).
RISKj, In es men isk, in he hos coun y (j), o e ime ( ). IMD (2020).
INSTj, The isk o poli ical ins abili y is e y low, in he hos coun y (i), o e ime ( ).
IMD (2020).
GMTj, Go e nmen e iciency, go e nmen decisions a e e ec i ely implemen ed, in he
hos coun y (j), o e ime ( ). IMD (2020).

J. Risk Financial Manag. 2021,14, 23 5 o 12
Table 2. Summa y S a is ics o he Basic Sample.
Va iable Uni s Mean S d. De . Min Max
FDIij, Iceland USD 187.7572 982.4527 −6.164 9538.254
FDIij, I eland US dolla s 132.8809 3273.049 −24652.05 20777.55
GDPi, US dolla s 8.56 ×1011 1.82 ×1012 3.78 ×1091.51 ×1013
POPi, Inhabi an s 103.9129 260.2633 0.279 1344.002
Skillsi, Index [0,10] 5.955366 1.313986 0 8.380953
EUi, EUi, ∈{0,1} 0.3965116 0.4894576 0 1
HOFSTEDEiIndex [0,100] 49.95874 8.732228 29.63903 66.84524
Ice_CREDITj, Index [0,10] 70.68182 12.4131 41 80.8
Ice_RISKj, Index [0,10] 84.10378 9.946038 64.39 92.13
Ice_INSTj, Index [0,10] 7.143074 3.09788 0 9.302325
Ice_GMTj, Index [0,10] 5.359459 2.281748 0 7.069767
I e_CREDITj, Index [0,10] 86.81818 7.189874 67.5 93.2
I e_RISKj, Index [0,10] 90.27111 5.384146 77.87 94.65
I e_INSTj, Index [0,10] 8.779427 0.9121318 6.32653 9.568627
I e_GMTj, Index [0,10] 5.123729 0.865086 3.772727 6.533333
The equa ions es ima es a e based on he g a i y model (Ma kusen 2004), hese a e
he ollowing;
sinh−1FDIij, =τ0+τ1ln(GDPi, )+τ2ln(POPi, )+τ3SDi ij,
+τ4EUi, +τ5HOFSTEDEi+τ6CREDITj, +εij,
(5)
In Equa ion (5) Fo eign Di ec In es men (FDI) is he dependen a iable. FDI is
ea ed wi h he in e se hype bolic sine unc ion (sinh
−1
) in o de o ake ze os and
po en ial nega i e alues in o accoun . Then he explana o y a iables a e he con en ional
g a i y model a iables o g oss domes ic p oduc (GDP) and ma ke size wi h popula ion
(POP). Then SDi accoun s o skill di e ences be ween he sou ce coun y o in es men ,
and he hos coun y. EU is a dummy a iable o he Eu opean Union, aking he alue 1
i he sou ce coun y has EU membe ship and 0 i no . The HOFSTEDE a iable accoun s
o cul u al alue o he sou ce coun y o in es men and C edi he C edi s a us in he
hos coun y o in es men .
Then he eg essions con inue and nex he RISK eplaces he CREDIT a iable, as
p esen ed in Equa ion (6):
sinh−1FDIij, =τ0+τ1ln(GDPi, )+τ2ln(POPi, )+τ3SDi ij,
+τ4EUi, +τ5HOFSTEDEi+τ6RISKj, +εij,
(6)
Equa ion (6) con inues wi h FDI,GDP,POP and om he Knowledge Capi al model
he e is he SDi a iable (Ca e al. 2001;Ma kusen 2004). Fu he mo e, by eplacing
RISK wi h he INST a iable, he eg ession accoun s o isk in he hos coun y.
sinh−1FDIij, =τ0+τ1ln(GDPi, )+τ2ln(POPi, )+τ3SDi ij,
+τ4EUi, +τ5HOFSTEDEi+τ6INSTj, +εij,
(7)
J. Risk Financial Manag. 2021,14, 23 6 o 12
In Equa ion (7) he INST a iable accoun s o isk o poli ical ins abili y in he hos
coun y o in es men .
sinh−1FDIij, =τ0+τ1ln(GDPi, )+τ2ln(POPi, )+τ3SDi ij,
+τ4EUi, +τ5HOFSTEDEi+τ6GMTj, +εij,
(8)
Finally, we es ima e equa ion wi h he GMT go e nmen e iciency a iable in Equa-
ion (8). Then go e nmen e iciency (GMT) eplaces RISK, wi h go e nmen e iciency
accoun ing o he go e nmen e iciency in he sou ce coun y o in es men .
4. Da a
A o al o 25 Eu opean coun ies a e included in he se o da a, hese a e: Aus ia,
Belgium, Czech Republic, Denma k, Es onia, Finland, F ance, Ge many, G eece, Hunga y,
Iceland, I eland, Is ael, I aly, Luxembou g, Ne he lands, No way, Poland, Po ugal, Slo ak
Republic, Slo enia, Spain, Sweden, Swi ze land, and he Uni ed Kingdom. Da a is on
annual bases, epo ing alues o e e y yea . We use da ase ob ained om he OECD.
“The O ganiza ion o Economic Co-ope a ion and De elopmen is an in e go e nmen al
economic o ganiza ion, ounded in 1961 o s imula e economic p og ess and wo ld ade”
(OECD 2020). Economis s ha e used OECD da ase o analyze he de e minan s o FDI
(K is jánsdó i 2016a,2016b). FDI s ock
j,
is he FDI se ies o BOP and IIP agg ega es.
Inwa d posi ion a yea -end US dolla , millions in hos coun y (j), o e ime ( ), ob ained
om he OECD (2020).
GDP
i,
is he g oss domes ic p oduc (GDP) cu en US$, in hos coun y (i). Running
o e ime ( ), ob ained om Wo ld Bank (2020). POP
i,
is popula ion, ob ained om IMD
(2020). SDi
ij,
he di e ence in he a ailabili y o skilled labo , be ween sou ce coun y
and hos coun y o in es men , ob ained om IMD (2020). EU
i,
is he dummy a iable
accoun ing o he sou ce coun y membe ship o he Eu opean Union, o e ime ( ),
ob ained om ECB (2020).
HOFSTEDE
i
is he Ho s ede (2001) cul u al dis ance index o he sou ce coun y,
ob ained om Ho s ede (1980,2001), Ho s ede and Bond (1988), Aðals einsson e al.
(2011). Da a on he Ho s ede cul u e a iable cap u es cul u al e ec s (Ho s ede 1980,
2001;Ho s ede and Bond 1988;K is jánsdó i e al. 2017,2020). The mos common e -
sion o he Ho s ede index does no include da a on Iceland. We he e o e add da a o
Iceland ob ained by Aðals einsson e al. (2011), applying he same ques ionnai e and da a
p ocessing as Ho s ede.
The Ho s ede measu es occasionally ake a alue o e 100 o he sample coun ies.
We he e o e escale alues, so hey ake a maximum alue o 100. Then he i e measu es
a e summed up, and di ided by 100 again, so he o e all Ho s ede index used he e uns
om 0 o 100. CREDIT
j,
is he coun y c edi a ing, in he hos coun y, ob ained om he
IMD (2020). The coun y c edi a ing a iable CREDIT accoun s o a ing on a scale o
0-100 assessed by he Ins i u ional In es o IMD (2020). Be o e applica ion, he CREDIT
a iable is such ha we di ide all alues by 10, and i he e o e uns om ze o o 10.
RISK
j,
is in es men isk, in he hos coun y, ob ained om he IMD (2020). The
in es men RISK a iable measu es he Eu omoney coun y isk o e all (scale om 0–100)
and is ob ained om he IMD (2020). The RISK a iable is di ided by 10, so i uns om 0–10.
INST
j,
is he isk o poli ical ins abili y is e y low, in he hos coun y, ob ained om
he IMD (2020). The a iable INST da a is om an execu i e su ey based on an index
om ze o o 10 IMD In e na ional in Lausanne Swi ze land, collec s indica o s o a ious
ac o s, including in as uc u e (IMD 2020).
GMT
j,
is he go e nmen e iciency, go e nmen decisions a e e ec i ely imple-
men ed, in he hos coun y, ob ained om he IMD (2020). The GMT a iable om
an execu i e su ey based on an index om ze o o en (IMD 2020).
The numbe o documen s analysed is e lec ed in he e e ence lis , lis ing 40 e e ences,
including bo h da a iles and heo e ical documen s. The so wa e used is he STATA so wa e.
The da a analysis me hod in ol es use o he g a i y model, accoun ing o economic size
J. Risk Financial Manag. 2021,14, 23 7 o 12
and dis ance, which is pa icula ly use ul when conside ing coun ies wi h small economy
size, like Iceland and I eland, geog aphically dis an om he cen e o Eu ope.
5. Reg ession Resul s
The analyzed pe iod uns in wo subpe iods, he i s subpe iod uns om 2000–2007
and he second subpe iod om 2008–2010. The eg essions a e un on hese wo di e en
subpe iods in o de o ge es ima es on he de e minan s o o eign di ec in es men (FDI),
be o e and a e he global inancial c isis.
Resul s a e ob ained by using he O dina y leas squa es (OLS) eg ession. When
eading h ough Tables 3–6, he es ima ion esul s can be in e p e ed as he ollowing:
Table 3. 2000–2007 ICELAND.
Equa ion (5) Equa ion (6) Equa ion (7) Equa ion (8)
Reg esso s FDI S ockij, FDI S ockij, FDI S ockij, FDI S ockij,
GDPi, 1.426 ***
(9.40)
1.506 ***
(8.08)
1.436 ***
(8.86)
1.429 ***
(9.20)
POPi,
−0.855 **
(−7.56)
−0.849 ***
(−6.89)
−0.860 ***
(−7.33)
−0.857 ***
(−7.48)
SDi ij, 0.193
(1.05)
0.452 ***
(2.78)
0.193
(1.06)
0.191
(1.05)
EUi,
−0.981 ***
(−3.30)
−0.673 *
(−1.94)
−0.980 ***
(−3.25)
−0.981 ***
(−3.26)
HOFSTEDEi
−0.128 ***
(−8.63)
−0.140 ***
(−8.42)
−0.129 ***
(−8.87)
−0.128 ***
(−8.88)
Ice_CREDITj,
−0.002
(−0.07)
Ice_RISKj, 0.029
(0.28)
Ice_INSTj, 0.190
(0.31)
Ice_GMTj, 0.122
(0.32)
Cons an −26.693 ***
(−5.31)
−31.046 ***
(−2.80)
−28.796 ***
(−3.79)
−27.759 ***
(−6.15)
R-sq 0.4666 0.4908 0.4669 0.4669
Obs 172 131 172 172
Robus -s a is ics epo ed in pa en heses. *** Signi ican a he 1 pe cen le el. ** Signi ican a he 5
pe cen le el. * Signi ican a he 10 pe cen le el.
Table 4. 2008–2010 ICELAND.
Equa ion (5) Equa ion (6) Equa ion (7) Equa ion (8)
Reg esso s FDI S ockij, FDI S ockij, FDI S ockij, FDI S ockij,
GDPi, 1.359 ***
(4.90)
1.361 ***
(4.91)
1.359 ***
(4.91)
1.357 ***
(4.91)
POPi,
−0.926 ***
(−4.67)
−0.927 ***
(−4.68)
−0.926 ***
(−4.70)
−0.924 ***
(−4.71)
SDi ij, 0.006
(0.10)
0.001
(0.02)
−0.001
(−0.01)
0.002
(0.03)
J. Risk Financial Manag. 2021,14, 23 8 o 12
Table 4. Con .
Equa ion (5) Equa ion (6) Equa ion (7) Equa ion (8)
EUi,
−0.437
(−0.95)
−0.435
(−0.94)
−0.434
(−0.94)
−0.435
(−0.94)
HOFSTEDEi
−0.130 ***
(−5.89)
−0.130 ***
(−5.90)
−0.130 ***
(−5.91 )
−0.130 ***
(−5.91)
Ice_CREDITj,
−0.012
(−0.77)
Ice_RISKj,
−0.016
(−0.68)
Ice_INSTj,
−0.029
(−0.35)
Ice_GMTj,
−0.032
(−0.26)
cons an −25.041 **
(−3.54)
−24.559 **
(−3.40)
−25.605 ***
(−3.68)
−25.560 ***
(−3.68)
R-sq 0.4251 0.4241 0.4217 0.4213
Obs 87 87 87 87
Robus -s a is ics epo ed in pa en heses. *** Signi ican a he 1 pe cen le el. ** Signi ican a he
5 pe cen le el.
Table 5. 2000–2007 IRELAND.
Equa ion (5) Equa ion (6) Equa ion (7) Equa ion (8)
Reg esso s FDI S ockij, FDI S ockij, FDI S ockij, FDI S ockij,
GDPi, 0.386
(0.61)
0.122
(0.19)
0.431
(0.66)
0.247
(0.40)
POPi,
−0.553
(−1.12)
−0.389
(−0.80)
−0.555
(−1.10)
−0.419
(−0.87)
SDi ij,
−0.476
(−1.01)
−0.391
(−0.85)
−0.373
(−0.81)
−0.295
(−0.64)
EUi,
−0.388
(−0.37)
−0.981
(−0.91)
−0.359
(−0.34)
−0.464
(−0.43)
HOFSTEDEi
−0.018
(−0.29)
−0.030
(−0.48)
−0.016
(−0.26)
−0.018
(−0.29)
I e_CREDITj,
−0.466 **
(−2.30)
I e_RISKj, 0.21
(0.36)
I e_INSTj,
−8.673 **
(−2.31)
I e_GMTj, 0.745
(0.79)
cons an 34.632
(1.50)
−19.718
(−0.36)
72.096 **
(1.98)
−8.043
(−0.45)
R-sq 0.0368 0.0146 0.0408 0.0093
Obs 168 160 168 168
Robus -s a is ics epo ed in pa en heses. ** Signi ican a he 5 pe cen le el.