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Causality between FDI and Financial Market Development: Evidence from Emerging Markets

Issouf Soumaré and Fulbert Tchana Tchana

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the causal relationship between foreign direct investment (FDI) and financial market development (FMD) using panel data from emerging markets. Most studies of the relationship between FDI and FMD have focused on the role of FMD in the link between FDI and economic growth, with no deep understanding of direct causality between FDI and FMD, especially in emerging markets, where financial markets are in the development stage. We document bidirectional causality between FDI and stock market development indicators. For banking sector development indicators, the relationship is ambiguous and inconclusive. Care is therefore needed when analysing the relationship between FMD and FDI, as results may depend on whether the FMD variables used to evaluate causality are stock market or banking sector development indicators.

Keywords: Foreign direct investment; FDI; financial market development; stock market development; banking sector development; causality (search for similar items in EconPapers)
JEL-codes: F21 O16 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-fdg and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Causality between FDI and Financial Market Development: Evidence from Emerging Markets (2015) Downloads
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