The Effects of Financial Development on Foreign Direct Investment
Rodolphe Desbordes and
No 23309, NBER Working Papers from National Bureau of Economic Research, Inc
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)
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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.
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Journal Article: The effects of financial development on foreign direct investment (2017)
Working Paper: The effects of financial development on foreign direct investment (2014)
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