FDI and Economic Growth: The Role of Local Financial Markets*

Sebnem Kalemli-Ozcan (), Laura Alfaro (), Selin Sayek () and Areendam Chanda

Macroeconomics from EconWPA

Abstract: 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 crosscountry data between 1975- 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.

Keywords: Foreign direct investment; financial markets; economic growth. (search for similar items in EconPapers)
JEL-codes: F23 F36 F43 (search for similar items in EconPapers)
Date: 2002-12-17
Note: Type of Document - Tex; prepared on PC; to print on HP; pages: 36 ; figures: included. working paper (revise and resubmit)
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Related works:
Journal Article: FDI and economic growth: the role of local financial markets (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0212007

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