EconPapers    
Economics at your fingertips  
 

Financial market development in host and source countries and their effects on bilateral foreign direct investment

Julian Donaubauer, Eric Neumayer () and Peter Nunnenkamp

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study an underexplored research question, namely whether financial market development in both host and source countries has an effect on bilateral stocks of foreign direct investment (FDI) and, particularly, whether the effect of financial market development in one member of the country pair conditions the effect of financial market development in the other member. We estimate gravity-type models in a global sample of 43 source and 137 host countries over the period 2001–12. We address reverse causality concerns by restricting the sample to observations where reverse causality, if existent, should be less relevant. Our major and robust findings are that bilateral FDI increases with better developed financial markets in both the host and the source country and that for developing host countries, financial market development in source and host countries functions as substitutes for each other.

Keywords: foreign direct investment; financial market devleopment; gravity model; financial market development (search for similar items in EconPapers)
JEL-codes: J1 L81 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2020-03-01
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Published in World Economy, 1, March, 2020, 43(3), pp. 534 - 556. ISSN: 0378-5920

Downloads: (external link)
http://eprints.lse.ac.uk/102996/ Open access version. (application/pdf)

Related works:
Journal Article: Financial market development in host and source countries and their effects on bilateral foreign direct investment (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:102996

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().

 
Page updated 2021-10-25
Handle: RePEc:ehl:lserod:102996