Does domestic financial development enhance the linkages between foreign direct investment and economic growth?

Empirical Economics

Volumn 42, Issue 3, 2012, Pages 819-834

  Choong, Chee Keong ^a  

^a UNIVERSITI TUNKU ABDUL RAHMAN   (Malaysia)

Author keywords

Economic growth; Financial development; Foreign direct investment; Panel data analysis

Indexed keywords

CAPITAL FLOW; DEVELOPING WORLD; ECONOMIC GROWTH; FINANCIAL SYSTEM; FOREIGN DIRECT INVESTMENT; PANEL DATA;

EID: 84860885110     PISSN: 03777332     EISSN: None     Source Type: Journal    
DOI: 10.1007/s00181-011-0455-2     Document Type: Article

References (66)

1. Aitken BJ, Harrison AE (1999) Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. Am Econ Rev 89: 605-618.
2. Aitken B, Hanson GH, Harrison AE (1997) Spillovers, foreign investment and export behavior. J Int Econ 43: 103-132.
3. Akinlo AE (2003) Globalisation, international investment and stock market growth in sub-Saharan Africa, vol 382. Institute of Developing Economies V. R. F Series, Japan External Trade Organization, Japan.
4. Alfaro L, Chanda A, Sebnem KO, Sayek S (2004) FDI and economic growth: the role of local financial markets. J Int Econ 64: 89-112.
5. Alfaro L, Chanda A, Sebnem KO, Sayek S (2010) Does foreign direct investment promote growth? Exploring the role of financial markets on linkages. J Dev Econ 91: 242-256.
6. Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58: 277-297.
7. Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-component models. J Econom 68: 29-51.
8. Azman-Saini WNW, Law SH, Ahmad AH (2010) FDI and economic growth: new evidence on the role of financial markets. Econ Lett 107: 211-213.
9. Balasubramanyam VN, Salisu M, Sapsford D (1996) Foreign direct investment and growth in EP and IS countries. Econ J 106: 92-105.
10. Baltagi BH (2008) Econometric analysis of panel data. John Wiley and Sons, Chichester.
11. Baltagi BH, Griffin JM (2001) The Econometrics of rational addiction: the case of cigarettes. J Bus Econ Stat 19: 449-454.
12. Baltagi BH, Bresson G, Griffin JM (2003) Homogeneous, heterogeneous or shrinkage estimators? Some empirical evidence from French regional gasoline consumption. Empir Econ 28: 795-811.
13. Baltagi BH, Egger P, Pfaffermayr M (2007) Estimating models of complex FDI: are there third-country effects?. J Econom 140: 260-281.
14. Baltagi BH, Egger P, Pfaffermayr M (2008) Estimating regional trade agreement effects on FDI in an interdependent world. J Econom 145: 194-208.
15. Barro R, Sala-I-Martin X (1995) Economic growth. McGraw-Hill, New York.
16. Baltagi BH, Demetriades PO, Law SH (2009) Financial development and openness: evidence from panel data. J Dev Econ 89: 285-296.
17. Basu P, Guariglia A (2007) Foreign direct investment, inequality, and growth. J Macroecon 29: 824-839.
18. Beck T, Demirguc-Kunt A, Levine R (2000a) A new database on financial development and structure. World Bank Econ Rev 14: 597-605. http://econ. worldbank. org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0, contentMDK: 20388241~menuPK: 665266~pagePK: 64165401~piPK: 64165026~theSitePK: 469382, 00. html. Accessed 18 Nov 2010.
19. Beck T, Levine R, Loyaza N (2000b) Finance and the sources of growth. J Financ Econ 58: 261-300.
20. Bekaert G, Harvey CR, Lundblad C (2003) Equity market liberalization in emerging markets. J Dev Econ 66: 465-504.
21. Blejer MI (2006) Economic growth and the stability and efficiency of the financial sector. J Bank Financ 30: 3429-3432.
22. Blomstrom M, Kokko A (1998) Multinational corporations and spillovers. J Econ Surv 12: 247-277.
23. Blomstrom M, Lipsey RE, Zejan M (1992) What explains developing country growth. NBER Working Paper Series no. 4132.
24. Blonigen BA (2006) A review of the empirical literature on FDI determinants. Atl Econ J 33: 383-403.
25. Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econom 87: 115-143.
26. Bordo MD, Meissner CM (2006) Financial crises, 1880-1913: the role of foreign currency debt. J Bank Financ 30: 3299-3329.
27. Borensztein E, De Gregorio J, Lee J-W (1998) How does foreign direct investment affect economic growth?. J Int Econ 45: 115-135.
28. Buckley PJ, Clegg J, Wang C, Cross AR (2002) FDI, regional differences and economic growth: panel data evidence from China. Transnl Corp 11: 1-23.
29. Calderon C, Liu L (2003) The direction of causality between financial development and economic growth. J Dev Econ 72: 321-334.
30. Carkovic M, Levine R (2005) Does foreign direct investment accelerate growth?. In: Moran TH, Graham EM, Blomstrom M (eds) Does foreign direct investment help promote economic development?. Institute for International Economics, Washington, DC, pp 195-220.
31. Choe JI (2003) Do foreign direct investment and gross domestic investment promote economic growth?. Rev Dev Econ 7: 44-57.
32. De Gregorio J, Guidotti PE (1995) Financial development and economic growth. World Dev 23: 433-448.
33. De Mello LR (1997) Foreign direct investment in developing countries and growth: a selective survey. J Dev Stud 34: 1-34.
34. De Mello L (1999) Foreign direct investment led growth: evidence from time-series and panel data. Oxf Econ Pap 51: 133-151.
35. Demetriades PO, Andrianova S (2004) Finance and growth: what we know and what we need to know. In: Goodhart CAE (ed) Financial development and growth: explaining the links. Palgrave Macmillan, Basingstoke, pp 38-65.
36. Demetriades PO, Luintel KB (1996) Banking sector policies and financial development in Nepal. Oxf Bull Econ Stat 58: 355-372.
37. Durham JB (2004) Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth. Eur Econ Rev 48: 285-306.
38. Easterly W, Rebelo S (1993) Fiscal policy and economic growth: an empirical investigation. J Monet Econ 32: 417-458.
39. Eller M, Haiss P, Steiner K (2006) Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: the crucial role of the efficiency channel. Emerg Mark Rev 7: 300-319.
40. Findlay R (1978) Relative backwardness, direct foreign investment, and the transfer of technology: a simple dynamic model. Q J Econ 92: 1-16.
41. Fukase E (2010) Revisiting linkages between openness, education and economic growth: system GMM approach. J Econ Integr 25: 194-223.
42. Ghosh BN (2003) Capital inflow, growth sustainability and financial debacles. East Mediterr Univ 29: 73-97.
43. Giacomo MD (2008) GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands. Empir Econ 34: 537-565.
44. Goldsmith RW (1969) Financial structure and development. CT Yale University Press, New Haven.
45. Greenwood J, Jovanovic B (1990) Financial development, growth, and the distribution of income. J Polit Econ 98: 1076-1107.
46. Grilli V, Milesi-Ferretti GM (1995) Economic effects and structural determinants of capital controls. Int Monet Fund Staff Pap 42: 517-551.
47. Haddad M, Harrison AE (1993) Are there positive spillovers from foreign direct investment? Evidence from panel data for Morocco. J Dev Econ 42: 51-74.
48. Hermes N, Lensink R (2003) Foreign direct investment, financial development and economic growth. J Dev Stud 40: 142-163.
49. King RG, Levine R (1993a) Finance and growth: Schumpeter might be right. Q J Econ 108: 717-738.
50. King RG, Levine R (1993b) Finance, entrepreneurship and growth: theory and evidence. J Monet Econ 32: 513-542.
51. Kosack S, Tobin J (2006) Funding self-sustaining development: the role of aid and FDI and government in economic success. Int Organ 60: 205-243.
52. Levine R (1991) Stock markets, growth, and tax policy. J Financ 46: 1445-1465.
53. Levine R (1997) Financial development and economic growth: views and agenda. J Econ Lit 35: 688-726.
54. Levine R (1999) Law, finance, and economic growth. J Financ Intermed 8: 8-35.
55. Levine R, Loayza N, Beck T (2000) Financial intermediation and growth: causality and causes. J Monet Econ 46: 31-77.
56. Lipsey RE (1999) The role of FDI in international capital flows. In: Feldstein M (ed) International capital flows. University of Chicago Press, Chicago.
57. McKinnon RI (1973) Money and capital in economic development. Brookings Institution, Washington, DC.
58. Mencinger J (2003) Does foreign direct investment always enhance economic growth?. Kyklos 56: 491-508.
59. Nair-Reichert U, Weinhold D (2001) Causality tests for cross-country panels: a new look on FDI and economic growth in developing countries. Oxf Bull Econ Stat 63: 153-171.
60. Ongena S, Smith DC, Michalsen D (2003) Firms and their distressed banks: lessons from the Norwegian banking crisis. J Financ Econ 67: 81-112.
61. Ranciere R, Tornell A, Westermann F (2006) Crisis and growth: a re-evaluation. J Bank Financ 30: 3331-3348.
62. Rioja F, Valev N (2004) Does one size fit all? A re-examination of the finance and growth relationship. J Dev Econ 74: 429-447.
63. Schich S, Pelgrin F (2002) Financial development and investment: panel data evidence for OECD countries from 1970 to 1997. Appl Econ Lett 9: 1-7.
64. Soto M (2003) Taxing capital flows: an empirical comparative analysis. J Dev Econ 72: 203-221.
65. Todo Y (2003) Empirically consistent scale effects: an endogenous growth model with technology transfer to developing countries. J Macroeconom 25: 25-46.
66. World Bank: (1989) World investment report 1989. Oxford University Press, New York.