Financial Globalization and Foreign Direct Investment

Steven Poelhekke

No 16-098/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This chapter provides a broad overview of the upward trends in financial globalization and foreign direct investment and asks whether and how financial globalization is linked with the foreign direct investment decisions of non-financial multinational enterprises. Several potential links and their empirical support in the recent literature are discussed: the elements of foreign direct investment that require (global) financial services; the role of trade credit; and the question whether banks follow their customers abroad. Finally, the effect of the recent financial crisis is discussed. It finds that financial globalization provides a reduction in broadly defined transaction costs which can boost both trade and foreign direct investment, at the costs of more exposure of the real economy to financial shocks.

Keywords: foreign direct investment; financial globalization; banks (search for similar items in EconPapers)
JEL-codes: F23 F36 F43 O40 (search for similar items in EconPapers)
Date: 2016-11-17
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20160098

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