Foreign direct investment, financial development and economic growth

A panel data analysis

Elya Nabila Abdul Bahri, Abu Hassan Shaari Md Nor, Nor Hakimah Haji Mohd Nor, Tamat Sarmidi

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This study investigates the effects of financial development in enabling foreign direct investment to promote economic growth. A sample of 65 developing countries is examined over the period of 2009 to 2015 with the dynamic panel estimation by using Generalized Method of Moment (GMM). Financial development is measured using three financial indicators and an index of financial development is constructed based on the following indicators: domestic credit to private sector, liquid liabilities and private credit by banks. The results demonstrate that the financial development index contributes positively and higher than each financial development proxy in influencing the effects of FDI on economic growth. However, FDI influence negative effect in the group of countries of low level of financial development. Thus, it suggests that financial development need to be increased and serves as a form of absorptive capacity that enable the positive growth effects of FDI in the recipient countries.

Original languageEnglish
JournalJurnal Pengurusan
Volume51
Publication statusPublished - 1 Jan 2017

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Panel data analysis
Foreign direct investment
Financial economics
Financial development
Economic growth
Credit
Generalized method of moments
Liability
Absorptive capacity
Financial indicators
Dynamic panel estimation
Private sector
Developing countries

Keywords

  • Developing countries
  • Economic growth
  • Financial development
  • Foreign direct investment

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Business, Management and Accounting (miscellaneous)

Cite this

Foreign direct investment, financial development and economic growth : A panel data analysis. / Bahri, Elya Nabila Abdul; Md Nor, Abu Hassan Shaari; Mohd Nor, Nor Hakimah Haji; Sarmidi, Tamat.

In: Jurnal Pengurusan, Vol. 51, 01.01.2017.

Research output: Contribution to journalArticle

Bahri, Elya Nabila Abdul ; Md Nor, Abu Hassan Shaari ; Mohd Nor, Nor Hakimah Haji ; Sarmidi, Tamat. / Foreign direct investment, financial development and economic growth : A panel data analysis. In: Jurnal Pengurusan. 2017 ; Vol. 51.
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