Journal
JOURNAL OF INTERNATIONAL ECONOMICS
Volume 64, Issue 1, Pages 89-112Publisher
ELSEVIER
DOI: 10.1016/S0022-1996(03)00081-3
Keywords
foreign direct investment; capital markets; credit markets; economic growth; spillovers
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In this paper, we examine the various links among foreign direct investment (FDI), financial markets, and economic growth. We explore whether countries with better financial systems can exploit FDI more efficiently. Empirical analysis, using cross-country data between 1975 and 1995, shows that FDI alone plays an ambiguous role in contributing to economic growth. However, countries with well-developed financial markets gain significantly from FDI. The results are robust to different measures of financial market development, the inclusion of other determinants of economic growth, and consideration of endogeneity. (C) 2003 Elsevier B.V. All rights reserved.
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