International Investment in Financial Services
21 Pages Posted: 29 Sep 2008 Last revised: 12 Jan 2009
Date Written: September 29, 2008
This paper analyzes and models the significant components of international trade in financial services, namely, foreign direct investment in banking for the US, the UK and Germany. It distinguishes between banks' activities abroad and FDI in banking by banks and non-banks. A model for FDI in banking is proposed which contains certain explanatory variables peculiar to FDI in banking as compared to FDI in manufacturing. The components of the model of FDI in banking is different from those models designed to explain banks activities abroad. The empirical results of this study of FDI in banking indicate that bilateral trade, banks' foreign assets, the cost of capital, relative economic growth, exchange rates and FDI in non-finance industries are the major determinants of foreign investment in banking.
Keywords: FDI in Banking, Financial Services, Data in FDI in Banking
JEL Classification: G15, G25
Suggested Citation: Suggested Citation