Foreign direct investments and financial development: empirical evidence from developed and developing countries
Künye
Satrovic, Elma, Muslija, Adnan.Foreıgn dırect ınvestments and fınancıal development: empırıcal evıdence from developed and developıng countrıes.Özet
This article aims to explore the relationship between foreign direct investments and the
financial development in both, developed and developing countries. The relevance of
financial development (FD) on foreign direct investments (FDI) is explored in three panels.
The first overall panel contains 93 economies; the second contains 32 developed economies,
while the third panel contains 61 developing economies over the period 2002-2015. A
Granger causality test that implements a vector autoregressive (VAR) framework within the
panel setting is employed. Besides this, panel regression model is estimated. In order to test
the sensitivity of the results and avoid robust errors, we employ a panel ARDL model. The
findings of ARDL model indicate that there is a long-run relationship between FD and FDI
for both developed and developing countries as well as for the overall sample. A short-run
relationship is reported for the overall sample of countries as well as for developed countries.
The estimation of panel regression model indicates a significant positive impact of domestic
credit to private sector (% GDP) on FDI in overall sample.Granger causality test indicates a
bidirectional relationship between financial development and foreign direct investments in
overall sample as well as in developing countries. A unidirectional relationship running from
financial development toforeign direct investmentsis reported for developed countries
