Interaction between foreign financial services and foreign direct investment in Transition Economies: An empirical analysis with focus on the manufacturing sector

Guido Cazzavillan and Krzysztof Olszewski ()

Research in Economics, 2012, vol. 66, issue 4, 305-319

Abstract: This paper studies the nexus between financial and non-financial foreign direct investment in Transition Economies, which are members of the EU. Three questions, which are pointed out in the theoretical literature, are discussed in the paper. We use a dataset for nine Transition Economies over the period 1996–2007, for most regressions we apply GMM and for one regression 2SLS. The empirical results lead to three important statements: non-financial FDI is positively affected by financial services FDI and by market potential. Foreign banks in the EU Transition Economies are mainly driven by non-financial FDI and the capital intensity of a country. FDI crowds out domestic investment in the manufacturing sector.

Keywords: Foreign direct investment; Financial services; Manufacturing sector; Bilateral stocks; Transition Economies (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:66:y:2012:i:4:p:305-319

DOI: 10.1016/j.rie.2012.08.001

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