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Foreign Direct Investment and Financial Resilience: Case of the Mediterranean Countries

Author

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  • Semia RACHID

    (Doctorate at the PS2D laboratory)

Abstract

During the last financial crises, foreign direct investment have shown an important financial resilience comparatively to other category of capital flows, in particular, foreign portfolio flows. For this reason the object of this study is to verify if foreign direct investment favours financial stability in the Mediterranean countries which know not only a great political and geography diversity, but also a different financial development of their financial systems. Evaluated by crisis indicators extracted from the economic literature, financial instability in the Mediterranean countries was clear from the existence of exchange market pressure and of the vulnerability of their banking systems. Moreover, the conduct of a descriptive analysis of the relation between foreign direct investment in its different dimensions (stability versus volatility, the degree of substitution to indebtedness) and the crisis index reveals that financial stability is largely favoured by an important stability of foreign direct investment and by its important replacement effect. This result is greatly confirmed by econometric analysis thinks to the estimation of a pooled panel data on a sample of Mediterranean countries in the period (1990-2006).

Suggested Citation

  • Semia RACHID, 2011. "Foreign Direct Investment and Financial Resilience: Case of the Mediterranean Countries," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 235-258, December.
    • Handle: RePEc:aic:revebs:y:2011:i:8:rachids
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    References listed on IDEAS

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    More about this item

    Keywords

    financial crisis; indebtedness; volatility; Foreign direct investment;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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