# **Table 11. Variable definitions**

|**Variables**|**Source**|**Variable definition**|
|---|---|---|
|Dependent variable:<br>Net FDI inflows (%GDP)|**UNTCAD**<br>**database on**<br>**FDI.**|FDI are on a net basis (capital transactions’ credits less debits between direct investors<br>and their foreign affiliates), or net acquisitions of assets (outward FDI) and net<br>incurrence of liabilities(inward FDI)|
|**Macroeconomic variables**|||
|Growth rate|**WDI**|GDP per capita growth at 2005 constant prices|
|Openness|**WDI**|It is measured as the exports plus the imports divided the GDP of one particular<br>country in a given year|
|Inflation|**WDI**|Inflation as measured by the consumer price index reflects the end-of- percentage<br>change in the cost to the average consumer of acquiring a basket of goods and services|
|**Infrastructure and human c**|**apital**||
|Infrastructure|**WDI**|Number of telephone and mobile phone line subscription|
|Human capital|**WDI**|Enrollment in tertiary education (%)|
|**Institutions**|||
|Law and order|**PRS Group:**<br>**International**<br>**Country Risk**<br>**Guide(ICRG)**|The "law" sub-component assesses the strength and impartiality of the legal system,<br>and the "order" sub-component assesses popular observance of the law.|
|Government stability|<br>**PRS (ICRG)**|A measure of both of the government’s ability to carry out its declared program(s), and<br>its ability to stay in office. The risk rating assigned is the sum of three subcomponents:<br>Government Unity,Legislative Strength,and Popular Support.|
|Corruption|**PRS (ICRG)**|A measure of corruption within the political system that is a threat to foreign<br>investment by distorting the economic and financial environment, reducing the<br>efficiency of government and business.|
|Bureaucracy quality|**PRS (ICRG)**|In low-risk countries, the bureaucracy is somewhat autonomous from political<br>pressure.|
|Investment profile|**PRS (ICRG)**|A measure of the factors affecting the risk to investment that are not covered by other<br>political, economic and financial risk components. The risk rating assigned is the sum<br>of three subcomponents: Contract Viability/Expropriation, Profits Repatriation, and<br>Payment Delays.|
|EU membership and<br>candidacy announcement|**EU**||
|**Country Risk**|||
|Risk for exchange rate<br>instability|**PRS (ICRG)**|Annual percentage change in the exchange rate of the national currency against the<br>USD (against the EUR in the case of the USD; prior to 2000, to the DM).|
|Economic risk rating|**PRS (ICRG)**|A means of assessing a country's current economic strengths and weaknesses. Risk<br>points are assessed for each of the component factors of GDP per head of population,<br>real annual GDP growth, annual inflation rate, budget balance as a percentage of GDP,<br>and current account balance as a percentage of GDP.|
|**Transition variables**|**EBRD**<br>**transition**<br>**database**|The transition indicator scores reflect the judgment of the EBRD’s Office of the Chief<br>Economist about country-specific progress in transition.More information available<br>on the EBRD website.|
|Privatization||Index of the level of Privatization|
|Price liberalization||Index of the level of Price liberalization|
|Competition policy||Index of the level of Competition policy|

Source: authors’ elaboration 34