سرمایه گذاری مستقیم خارجی و رشد اقتصادی: شواهد جدید در مورد نقش بازارهای مالی

This study uses a threshold regression model and finds new evidence that the positive impact of FDI on growth “kicks in” only after financial market development exceeds a threshold level. Until then, the benefit of FDI is non-existent.

There is a widespread view that the impact of foreign direct investment (FDI) on economic growth is ambiguous (Gorg and Greenaway, 2004).1 One possible explanation for this mixed finding may be the failure to model contingency effects in the relationship between FDI and growth. A number of economic models suggest that the relationship between FDI and growth may be contingent on other intervening factors. For instance, the model by Hermes and Lensink (2003) predicts that the impact of FDI on economic growth is contingent on the development of financial markets of the host country. According to the authors, well-functioning financial markets reduce the risks inherent in the investment made by local firms that seek to imitate new technologies and thereby improve the absorptive capacity of a country with respect to FDI inflows.2 Unfortunately, the role of financial markets in the FDI-growth relation has been hardly investigated. An exception is the study by Alfaro et al. (2004), who, using a linear interaction model, find that the development of local financial markets is an important pre-condition for a positive impact of FDI on growth.3 A limitation with this type of modeling strategy is that the interaction term (constructed as a product of FDI and financial markets indicator) imposes à priori restriction that the impact of FDI on growth monotonically increasing (or decreasing) with financial development. However, it may be the case that a certain level of financial development is required before host countries can benefit from FDI-generated externalities.4 This suggests the need for a more flexible specification that can accommodate different kinds of FDI-growth-financial markets interactions. In this paper, we use a different approach to examine the role local financial markets play in mediating FDI effects on output growth. We use a regression model based on the concept of threshold effects. Our fitted model allows the relationship between growth and FDI to be piecewise linear with the financial market indicator acting as a regime-switching trigger. Using cross country observations from 91 countries over the 1975–2005 period, we find strong evidence of threshold effects in FDI-growth link. Specifically, we find that the impact of FDI on growth ‘kicks in” only after financial development exceeds a certain threshold level. Until then, the benefits of FDI are non-existent.

We present new evidence on the role financial market developments play in mediating the impact of FDI on growth, using data from 91 countries over the period 1975–2005. One major contribution of the paper is the adoption of the regression model based on the concept of threshold effects to capture rich dynamic in the relationship between FDI, output growth, and financial markets. We find that the positive effect of FDI on growth ‘kick in’ only after financial markets development exceeds a threshold level. This finding underlines the importance for government to emphasize on diffusion aspect in formulating FDI policies as knowledge diffusion is not sustained on welfare ground. Therefore, policies directed towards attracting FDI should go hand in hand with, not precede, policies that aims at promoting financial market developments.