Determinants of Foreign Portfolio Investment in the Western Balkan Countries

Securities and other capital inflows of assets that may be held by other foreign nations make up international portfolio investments. An investor who makes a foreign portfolio investment (FPI) gains indirect ownership of financial assets. So, this study aims to investigate the main determinants of FPI in Western Balkan countries. Key variables included in the study are portfolio investment, GDP per capita growth, foreign direct investment (FDI), external debt (EXD), inflation, population, real interest rate, and regulatory quality, sourced from the World Bank. The methodology employed involves panel data regression analysis using fixed and random effects, allowing the observation of the influence of economic, demographic, and institutional factors across time and entities. It is important to observe if FPI is determined by economic growth and other considered potential determinants. The findings indicate that the portfolio investment of Western Balkan countries is significantly influenced by GDP per capita growth, external debt, inflation, and real interest rates.