The Effects of Financial Development on Foreign Direct Investment

Rodolphe Desbordes and Shang-Jin Wei

No 23309, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper empirically investigates the various effects that source and destination countries’ financial development (SFD and DFD respectively) have on foreign direct investment (FDI).We establish causality by exploiting variations in both country-specific financial development and sector-specific financial vulnerability. This approach is made possible by our use of detailed databases on real manufacturing FDI projects worldwide. We find that both SFD and DFD have a large positive influence on greenfield, expansion, and mergers & acquisitions FDI, by directly increasing access to external finance and indirectly promoting manufacturing activity. The overall economic impacts of SFD and DFD tend to be similar but their direct and indirect effects vary across margins and types of FDI.

JEL-codes: F21 O1 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-int
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (121)

Published as Desbordes, Rodolphe & Wei, Shang-Jin, 2017. "The effects of financial development on foreign direct investment," Journal of Development Economics, Elsevier, vol. 127(C), pages 153-168.

Downloads: (external link)
http://www.nber.org/papers/w23309.pdf (application/pdf)

Related works:
Journal Article: The effects of financial development on foreign direct investment (2017)
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:nbr:nberwo:23309

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23309

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().