The paper investigates factors explaining foreign direct investment flows and the optimal model, including factors that fairly describe FDI flows. Derived model is tested by means of different econometric methods applied to panel data. Methodological base of research is gravity model estimation towards FDI flows explanation. Result of the research shows that for several reasons the most optimal method of gravity model estimation is Poisson Pseudo Maximum Likelihood method. Testing derived model by means of this method the most significant factors influencing FDI flows were extracted: GDPs of countries, distance between them, country-importer openness, common language and labor costs in country-importer of FDI.