Financial System Development and Foreign Direct Investment: A Panel Data Study for BRIC Countries

Kaur, Manpreet; Yadav, Surendra S.; Gautam, Vinayshil

doi:10.1177/0972150913501607

Cited by 62 publications

(64 citation statements)

References 14 publications

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“…The function of financial institutions in host countries is essential because they provide the services to the foreign investors in terms of lower costs and quicker transactions, loans availability and better foreign exchange services. This result is similar to the findings of Hussain & Kimuli (2012) and Kaur, Yadava, and Gautam (2013).…”

Section: P-valuessupporting

confidence: 95%

Determinants of FDI inflows to Arab economies

Aziz

Mishra

2015

The Journal of International Trade & Economic Development

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The paper studies location determinants of foreign direct investment (FDI) to 16 Arab economies over the period from 1984 to 2012, by employing Arellano-Bover/Blundell-Bond linear dynamic panel data estimation. We find that market size, trade openness, preferential trade agreements and financial development have significant positive impact on FDI inflows to Arab economies. FDI in Arab economies appears to be resource seeking since the total oil supply variable is positive and significant. The paper finds that better institutions and educated labour force may play a key role in attracting FDI inflows. We suggest that Arab economies should sequence their economic policy measures with the institutional ones, beginning with a focus on privatization and trade liberalization, and subsequently shift to improvement in economic growth.

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Section: P-valuessupporting

confidence: 95%

Determinants of FDI inflows to Arab economies

Aziz

Mishra

2015

The Journal of International Trade & Economic Development

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“…Consistent with Ezeoha and Cattaneo (2012), the impact of financial sector development on FDI is summarised into the allocative channel, economic efficiency and the liquidity easing theoretical rationales. Proponents of the allocative channel rationale including Kaur et al (2013), among others, argue that well developed financial markets are better able to increase foreign capital productivity through allocating financial resources to projects with a high rate of return. The economic efficiency rationale proposes that well developed financial markets have got the better capacity to ease information flow and reducing transaction costs thereby positively influencing FDI (Claessen and Laeven, 2003;Bartels et al, 2009;Ezeoha and Cattaneo, 2012).…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

“…Choong (2012:828) acknowledged that financial sector development must reach a certain minimum threshold point before FDI inflows positively and significantly influence economic growth in the host countries. In a panel study of BRICS (Brazil, Russia, India, China and South Africa) countries, Kaur et al (2013) reported that developed financial markets enable host countries to benefit from FDI through better provision of financial support in terms of quicker transactions, provision of loans, good foreign currency services and optimal allocation of capital to more deserving projects.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Financial Sector Development on Foreign Direct Investment: An Empirical Study on Minimum Threshold Levels

Tsaurai

Makina

2018

JEBS

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Using panel data of 21 emerging economies, the paper investigates the financial sector development threshold levels that would influence foreign direct investment (FDI) inflows. The threshold levels we identified are 41.27% of stock market capitalization for stock market turnover, 53.55% of gross domestic product (GDP) for stock market value traded, 121.53% of GDP for stock market capitalization, 114.43% of GDP for domestic credit to private sector by banks, 144.06% of GDP for domestic credit provided by financial sector, 0.22% of GDP for outstanding domestic private debt securities and 41.26% of GDP for outstanding domestic public debt securities. Our results show that higher stock market and banking sector development above the threshold level positively and significantly influence FDI inflows whilst the influence of lower stock market and banking sector development on FDI inflows was weak and not significant. Levels of private bond market development equal to or greater than the threshold level are found to have a positive but non-significant impact on FDI inflows whilst private bond market development levels less than the threshold have a weaker positive and non-significant influence on FDI inflows. On the other hand, public bond market development levels equal to or greater than the threshold level negatively influenced FDI inflows whilst levels of public bond market development less than the threshold positively but non-significantly attracted FDI inflows into emerging markets.

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“…2015;Pan. 2003;Kaur et al, 2013) and section 4 of this paper and (2) data availability. Exports of goods and services (% of GDP), inflation, consumer prices (annual %), GDP per capita, domestic credit provided by the financial sector (% of GDP), total education expenditure by government (% of GDP), exchange rate (local currency/US$) respectively were used as measures for trade openness, inflation, economic growth, financial development, education and exchange rate, in line with majority of the prior studies on a similar subject matter.…”

Section: + Exchange Ratementioning

confidence: 99%

Foreign Direct Investment Dynamics in Hungary

Tsaurai¹

2018

JEBS

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The study discussed the dynamics of FDI in Hungary during the period from 1991 to 2015. The impact of FDI, FDI trends and determinants of FDI in Hungary were discussed. Empirical literature observed that FDI positively influenced economic growth in Hungary through boosting human capital development levels, total factor productivity, economic transformation, innovation, research and development, additional capital in the economy, modern technology, increased volume of additional capital and technology transfer. The study also revealed that most of the net FDI inflow into Hungary originated from developed countries and the least FDI net inflow came from transitional economies during the period under study. The general trend of FDI net inflow into Hungary followed a mixed pattern, with some years experiencing a positive net FDI inflow whilst other years were characterised by negative net FDI inflows. What is clear however is that FDI net inflow was consistently positive and experienced a positive growth following the integration of Hungary into the EU bloc of countries? The accession of Hungary into the EU removed barriers for the movement of capital, people, goods and services within the EU, reduced the cost of doing business and improved trade openness. These are the key locational advantages of FDI which improved FDI inflow into Hungary for a sustained period of time after the EU accession. The study also empirically tested the determinants of FDI in Hungary using the OLS multiple regression model with data ranging from 1991 to 2015. In contradiction to most previous studies on the subject matter, trade openness and financial development were found to have had a negative influence on FDI. The study also observed that inflation had a positive influence on FDI, contrary to Sayek (2009) who revealed that higher inflation levels erodes the foreign investorsâ€™ profits, thereby making the host country not an attractive investment destination. However, exchange rate, education and economic growth had a positive but non-significant impact on FDI in Hungary, consistent to both theoretical and empirical literature. The implication of the study is that the Hungarian authorities are urged to design and implement policies aimed at improving education and economic growth in order to attract more FDI. Practical steps need to be taken by the Hungarian authorities in making sure that the value of the local currency is not overvalued and that trade openness is controlled and managed so that it does not reach a point where it begins to negatively affect FDI inflows.

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Financial System Development and Foreign Direct Investment: A Panel Data Study for BRIC Countries

Cited by 62 publications

References 14 publications

Determinants of FDI inflows to Arab economies

Determinants of FDI inflows to Arab economies

The Impact of Financial Sector Development on Foreign Direct Investment: An Empirical Study on Minimum Threshold Levels

Foreign Direct Investment Dynamics in Hungary

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