The External Economic Environment as an Attractive Factor for Foreign Direct Investment in Kosovo: An Econometric Analysis

This study aims to analyze the impact of key economic factors on the motivation of foreign investors in Kosovo, focusing on indicators such as exchange rate (ER), inflation (INF), interest rates (IR), access to credit (AC), competition (CO), banking services and e-banking (E-BBS), economic growth (EGr), and taxes (Tax).Primary data were collected through a structured questionnaire randomly distributed to a sample of 148 foreign investors.The reliability and validity of the data were assessed through statistical tests such as Cronbach's Alpha, KMO and Bartlett's Test, as well as Principal Component Analysis (PCA) and Collinearity Statistics.For data analysis, multiple linear regression and Kendall's Tau-b analysis were applied using the SPSS 25 statistical software package.The findings highlight that Economic Growth, strongest positive impact (B=6.497,p<0.001), indicating that GDP growth enhances investor confidence.ER, significant positive effect (B=2.584, p =0.009), highlighting the importance of currency stability.INF Rate, notable positive influence (B=2.734,p=0.019), suggesting that predictable INF is acceptable to investors.AC, strong negative effect (B=-5.575, p<0.001), emphasizing that limited credit access deters investment.IR, marginal negative impact (B=-3.144,p=0.055), implying that higher IR may reduce investment motivation.The model explains 30.8% of the variability in investor motivation, implying that other factors also deserve further analysis.Kendall's tau-b analysis confirms a strong correlation between ER and AC with investor motivation, while IR and banking services show a weak correlation.In line with Dunning's theory, location advantages-such as the ER and economic growth-play a vital role in attracting investments, while internalization advantages -such as AC-also contribute significantly.This research challenges traditional views by revealing a positive relationship between INF and foreign direct investment (FDI), offering new perspectives for policymakers.It recommends focusing on ER stability, improving AC, and undertaking structural reforms as mechanisms for boosting foreign investment in Kosovo.The original contribution of this study lies in identifying a positive link between INF and FDI, as well as highlighting less-studied factors such as ER and credit access as key elements.Additionally, it emphasizes the impact of competition and banking services, the challenges to economic growth, and the role of structural reforms and fiscal incentives in attracting new investors.