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FDI, Finance and Growth:Further Empirical Evidence from a Panel of 73 Countries

Dimitrios Asteriou () and Argiro Moudatsou

Applied Economics and Finance, 2014, vol. 1, issue 2, 48-57

Abstract: The aim of this study is to investigate whether the level of financial development can make a significant contribution to the Foreign Direct Investment¡¯s (FDI) positive impact on economic growth. In other words, to examine whether the contribution of FDI on growth is relatively more important in countries with well-developed financial markets compared to those with the less-developed ones. The time period of the empirical research spans from 1988-2009, using yearly macroeconomic data for a sample of 73 developing countries. Our empirical methodology consists of panel-growth regressions. Our results suggest that the FDI make substantial contribution to growth where financial systems function effectively, such as high-income countries, while the FDI impact is found to be insignificant in cases where relatively weaker financial systems exist.

Keywords: Foreign Direct Investment; Financial Development; Panel Data Regressions (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:rfa:aefjnl:v:1:y:2014:i:2:p:48-57