Effects of Globalization, Renewable Energy and Ecological Footprint on Foreign Direct Investments for Western Balkan Countries

Abstract

This research investigates how foreign direct investments (FDI) in Western Balkan countries are influenced by globalization, renewable energy consumption, and ecological footprint during the period 2010–2022. As the region increasingly integrates into global markets while addressing environmental and energy transition challenges, understanding these dynamics becomes essential. The study utilizes an empirical panel data approach, applying the Fixed Effects Model, which was selected as the most appropriate through the Hausman test. Macroeconomic control variables such as GDP per capita and inflation are included to isolate the effects of the main explanatory variables. The model adheres to the Gauss-Markov assumptions, and various diagnostic tests are conducted to check for multicollinearity, heteroskedasticity, and autocorrelation. The empirical findings reveal that globalization and renewable energy consumption have a positive and statistically significant impact on FDI inflows. In contrast, the ecological footprint shows a mixed or insignificant effect, suggesting that environmental degradation may not yet be a decisive factor for attracting or deterring investment in the region. The study offers relevant insights for policymakers and investors, emphasizing that enhanced global integration and sustainable energy strategies may play a vital role in boosting FDI across the Western Balkans.