 FDI, corruption and financial development around the world: A panel non-linear approachHadjila Krifa-Schneider, Iuliana Matei and Abdul Sattar Economic Modelling, 2022, vol. 110, issue C Abstract: The nexus between corruption and FDI has long been examined, but the literature remains inconclusive. Some studies have found that corruption deters FDI while others concluded the opposite. This paper revisits the FDI–corruption nexus by investigating the mediating role of financial development for 80 advanced and emerging economies over the 2003–2019 period. Using panel smooth transition regression and GMM models, we find a non-linear relationship between corruption and FDI driven by the financial development level of the destination country. In the advanced economies, less corruption means more FDI above a corruption threshold, whereas in emerging economies, corruption level is less important as the countries are more tolerant to it. We thus contribute to the extant literature a potential reconciliation of the theories stressing that corruption can ‘sand the wheels’ and ‘grease the wheels’ of FDI. A corrupt environment can, therefore, attract FDI, but is not a prudent long-term option. Keywords: Foreign direct investment; Corruption; Financial development; Advanced and; Emerging economies; Panel Smooth Transition Regression (PSTR) and Generalized Method of Moments (GMM) panel Models (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:110:y:2022:i:c:s0264999322000554 DOI: 10.1016/j.econmod.2022.105809 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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