FDI, Finance and Growth: Further Empirical Evidence from a Panel of 73 Countries

Dimitrios Asteriou, Argiro Moudatsou

Abstract


The aim of this study is to investigate whether the level of financial development can make a significant contribution to the Foreign Direct Investment’s (FDI) positive impact on economic growth. In other words, to examine whether the contribution of FDI on growth is relatively more important in countries with well-developed financial markets compared to those with the less-developed ones. The time period of the empirical research spans from 1988-2009, using yearly macroeconomic data for a sample of 73 developing countries. Our empirical methodology consists of panel-growth regressions. Our results suggest that the FDI make substantial contribution to growth where financial systems function effectively, such as high-income countries, while the FDI impact is found to be insignificant in cases where relatively weaker financial systems exist.


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References


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DOI: https://doi.org/10.11114/aef.v1i2.480

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