This study examines the role of banking development quality in the FDI-growth nexus from 1998 to 2009. Banking development quality is measured using two standardized intermediation cost indicators and an index of banking development quality that is constructed based on the following indicators: overhead costs to total assets and net interest margin. The results for developed countries show that, on its own, FDI is negatively related to economic growth. However, when FDI is interacted with a banking development quality index, the quality of banking development is found to play a positive role in influencing the effects of FDI on economic growth. This suggests that the quality of banking development serves as an absorptive capacity that allows developed countries to benefit from the positive growth effects of FDI. On the contrary, for emerging countries, the findings indicate that banking development quality plays no role in influencing the impact of FDI on economic growth. This implies that the quality of banking development in emerging countries has yet to reach a level that allows it to importantly influence the growth effects of FDI.Abstrak: Penelitian ini menguji peran pengembangan kualitas perbankan di FDI -pertumbuhan perhubungan 1998-2009. Pengembangan kualitas perbankan diukur dengan menggunakan dua indikator intermediasi biaya standar dan indeks pembangunan kualitas perbankan yang dibangun berdasarkan indikator berikut: biaya overhead terhadap jumlah aktiva dan net interest margin. Hasil untuk negara maju menunjukkan bahwa dengan sendirinya, FDI berhubungan negatif dengan pertumbuhan ekonomi. Namun, ketika FDI berinteraksi dengan perbankan, indeks kualitas pembangunan perbankan ditemukan untuk memainkan peran positif dalam mempengaruhi efek FDI terhadap pertumbuhan ekonomi. Hal ini menunjukkan bahwa kualitas perkembangan perbankan berfungsi sebagai daya serap yang memungkinkan negara maju untuk mendapatkan keuntungan dari efek pertumbuhan positif FDI. Sebaliknya, bagi negara-negara berkembang, temuan menunjukkan bahwa kualitas perkembangan perbankan tidak memainkan peran dalam mempengaruhi dampak FDI terhadap pertumbuhan ekonomi. Ini berarti bahwa kualitas perkembangan perbankan di negara-negara berkembang belum mencapai tingkat yang memungkinkan untuk kepentingan mempengaruhi efek pertumbuhan FDI.
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