Abstract
This paper investigate the long run relationship between financial depth, FDI and economic growth in a sample of 5 FDI-receiving NACs over the period 1980-2018. A standard growth models are estimated using both fixed-effects and random effects models. In addition panel unit root and panel cointegration tests are employed to check for the efficiency of the data. The long run relationship is estimated using fully modified OLS and: Panel Dynamic Least Squares (DOLS) methods.
The empirical results show the support of the fixed –effects method as the random effects model is rejected based on Hausman test result. The results of fixed effect show positive and statistically significant measures of the interaction terms of financial market development indicators with FDI. These results confirm the complementarity between the different components of financial intermediary and FDI, and their effect on economic growth. The panel cointegration tests confirm the fact that there is a positive, significant and long period relationship among finanacial depth indicators, FDI and economic growth.
.This study concludes that for countries in NACs region, to utilize the benefits from FDI more emphasis and concern should be directed to the pre-country conditions for attracting FDI, mainly financial sector development.
The empirical results show the support of the fixed –effects method as the random effects model is rejected based on Hausman test result. The results of fixed effect show positive and statistically significant measures of the interaction terms of financial market development indicators with FDI. These results confirm the complementarity between the different components of financial intermediary and FDI, and their effect on economic growth. The panel cointegration tests confirm the fact that there is a positive, significant and long period relationship among finanacial depth indicators, FDI and economic growth.
.This study concludes that for countries in NACs region, to utilize the benefits from FDI more emphasis and concern should be directed to the pre-country conditions for attracting FDI, mainly financial sector development.
Original language | English |
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Article number | 3 |
Pages (from-to) | 1779-1788 |
Number of pages | 9 |
Journal | International Journal of Business Management and Economic Research(IJBMER), |
Volume | 11 |
Issue number | 3 |
Publication status | Published - 2020 |