Foreign Direct Investment and Local Financial Market Development: A Granger Causality Test Using Panel Data

Abstract:     
This paper reports the findings of Granger causality tests on the relationship between foreign direct investment (henceforth, FDI) and local financial market development across 62 countries from 1996 to 2007. In this paper we explore whether local financial market development is important in catalyzing the flow of foreign direct investment. findings results are robust to different measures of financial market development. Furthermore, the results indicate that most of the causal links are found in Non OECD, Low income and Lower middle Income countries.

Number of Pages in PDF File: 13

Keywords: FDI, Financial market, Capital markets, Credit markets

JEL Classification: F21, P45, O16, G1

working papers series