Arbeitspapier

Does foreign direct investment in financial services induce financial development? Lessons from emerging economies

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The authors employ panel Vector Error Correction Models (VECM) and cointegration framework to identify the existence and direction of the causal association between foreign direct investment (FDI) in financial services and financial development for 26 emerging economies for the period 2003-2015. Their results show that there exists a long-run cointegrating relationship between financial development and FDI in financial services after incorporating the extent of heterogeneity among emerging economies. The authors find long run unidirectional causality from financial development to financial services FDI. Using fully modified OLS (FMOLS) estimation, they estimate the long run elasticities between financial services FDI and financial development. Their results show that financial development has a positive and significant impact on FDI in financial services, which implies that a country with well-developed financial markets tend to attract larger amounts of FDI in financial services.

Language
Englisch

Bibliographic citation
Series: Economics Discussion Papers ; No. 2019-55

Classification
Wirtschaft
Financial Institutions and Services: General
Multinational Firms; International Business
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Subject
financial development
FDI
services
emerging economies

Event
Geistige Schöpfung
(who)
Podikkalathil, Jithin
Manalaya, Suresh Babu
Event
Veröffentlichung
(who)
Kiel Institute for the World Economy (IfW)
(where)
Kiel
(when)
2019

Handle
Last update
10.03.2025, 11:42 AM CET

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Object type

  • Arbeitspapier

Associated

  • Podikkalathil, Jithin
  • Manalaya, Suresh Babu
  • Kiel Institute for the World Economy (IfW)

Time of origin

  • 2019

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