Advanced Search
MyIDEAS: Login to save this article or follow this journal

Foreign Direct Investment-Economic Growth Nexus: The Role of Domestic Financial Development in Portugal

Contents:

Author Info

  • Muhammad Shahbaz

    ()
    (COMSATS Institute of Information Technology, Lahore)

  • Nuno Carlos leitão

    ()
    (ESGTS, Polytechnic Institute of Santarém, and CEFAGE- University of Évora, Portugal)

  • Summaira Malik

    ()
    (National College of Business Administration and Economics, Lahore, Pakistan)

Abstract

The aim of present paper is to examine the role of financial development on FDI-Growth nexus using annual data over the period of 1975-2008. The results show that financial development is playing its role well but not satisfactory. This study will provide new guidelines for policy making authorities for Portuguese's economy. The manuscript applies the unrestricted error correction model (ECM) estimator advanced by Inder (1993) while ARDL bounds testing approach is employed to find cointegration among variables. Stationarity issue is investigated by Ng-Perron unit root test. The results show that financial development stimulates economic growth for the case of Portugal. Foreign direct investment also good promoter of economic growth while investment in public capital stock is contributing more as compared to financial development and foreign direct investment. Inflation declines economic growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I4-P254.pdf
Download Restriction: no

Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 4 ()
Pages: 2824-2838

as in new window
Handle: RePEc:ebl:ecbull:eb-11-00517

Contact details of provider:

Related research

Keywords: FDI-growth nexus; ARDL estimator; cointegration; Portugal.;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  2. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, Elsevier, vol. 84(1), pages 215-233, September.
  3. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, Elsevier, vol. 64(1), pages 89-112, October.
  4. Paul Turner, 2006. "Response surfaces for an F-test for cointegration," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(8), pages 479-482.
  5. Inder, Brett, 1993. "Estimating long-run relationships in economics : A comparison of different approaches," Journal of Econometrics, Elsevier, Elsevier, vol. 57(1-3), pages 53-68.
  6. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, Elsevier, vol. 43(2), pages 335-356, February.
  7. Muhammad, Shahbaz & Nuno, Carlos Leitão & Summaira, Malik, 2011. "Foreign direct investment-economic growth nexus: The role of domestic financial development in Portugal," MPRA Paper 34226, University Library of Munich, Germany, revised 20 Oct 2011.
  8. Signe Krogstrup & Linda Matar, 2005. "Foreign Direct Investment, Absorptive Capacity and Growth in the Arab World," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 02-2005, Economics Section, The Graduate Institute of International Studies.
  9. Bailliu, Jeannine N., 2000. "Private Capital Flows, Financial Development, and Economic Growth in Developing Countries," Working Papers, Bank of Canada 00-15, Bank of Canada.
  10. Kalemli-Özcan, Sebnem & Chanda, Areendam & Alfaro, Laura & Sayek, Selin, 2007. "How Does Foreign Direct Investment Promote Economic Growth? Exploring The Effects Of Financial Markets On Linkages," Proceedings of the German Development Economics Conference, Göttingen 2007 28, Verein für Socialpolitik, Research Committee Development Economics.
  11. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile, Central Bank of Chile 56, Central Bank of Chile.
  12. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  13. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 92(1), pages 1-16, February.
  14. James Ang, 2009. "Foreign direct investment and its impact on the Thai economy: the role of financial development," Journal of Economics and Finance, Springer, Springer, vol. 33(3), pages 316-323, July.
  15. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  16. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  17. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 513-542, December.
  18. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, Elsevier, vol. 42(1), pages 51-74, October.
  19. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, Elsevier, vol. 45(1), pages 115-135, June.
  20. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 407-37, May.
  21. Magnus Blomstrom & Ari Kokko, 1993. "Policies to Encourage Inflows of Technology Through Foreign Multinationals," NBER Working Papers 4289, National Bureau of Economic Research, Inc.
  22. Mohammad Shahbaz, 2009. "A Reassessment of Finance-Growth Nexus for Pakistan: Under the Investigation of FMOLS and DOLS Techniques," The IUP Journal of Applied Economics, IUP Publications, IUP Publications, vol. 0(1), pages 65-80, January.
  23. Muhammad Shahbaz & S M Aamir Shamim & Naveed Aamir, 2010. "Macroeconomic Environment and Financial Sector’s Performance: Econometric Evidence from Three Traditional Approaches," The IUP Journal of Financial Economics, IUP Publications, IUP Publications, vol. 0(1 & 2), pages 103-123, March & J.
  24. Ehrlich, Isaac, 1977. "The Deterrent Effect of Capital Punishment: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 452-58, June.
  25. Christer Ljungwall & Junjie Li, 2007. "Financial Sector Development, FDI and Economic Growth in China," Finance Working Papers 22026, East Asian Bureau of Economic Research.
  26. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 605-618, June.
  27. Ehrlich, Isaac, 1975. "The Deterrent Effect of Capital Punishment: A Question of Life and Death," American Economic Review, American Economic Association, American Economic Association, vol. 65(3), pages 397-417, June.
  28. James Ang, 2009. "Financial development and the FDI-growth nexus: the Malaysian experience," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(13), pages 1595-1601.
  29. Mansfield, Edwin & Romeo, Anthony, 1980. "Technology Transfer to Overseas Subsidiaries by U.S.-Based Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(4), pages 737-50, December.
  30. Mohsin Hasnain Ahmad & Shaista Alam & Mohammad Sabihuddin Butt, 2003. "Foreign Direct Investment, Exports, and Domestic Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 42(4), pages 715-723.
  31. Seaks, Terry G & Layson, Stephen K, 1983. "Box-Cox Estimation with Standard Econometric Problems," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 160-64, February.
  32. Lipsey, Robert & Sjöholm, Fredrik, 2004. "Host Country Impacts Of Inward Fdi: Why Such Different Answers?," EIJS Working Paper Series, The European Institute of Japanese Studies 192, The European Institute of Japanese Studies.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mohammad Mafizur Rahman & Muhammad Shahbaz, 2013. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 59-81, March.
  2. Shahbaz, Muhammad & Ur Rehman, Ijaz & Zainudin, Rozaimah, 2013. "Macroeconomic Determinants of Stock Market Capitalization in Pakistan:Fresh Evidence from Cointegration with unknown Structural breaks," MPRA Paper 52490, University Library of Munich, Germany, revised 24 Dec 2013.
  3. Muhammad, Shahbaz & Mohammad, Mafizur Rahman & Abdul, Farooq, 2012. "Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis," MPRA Paper 42023, University Library of Munich, Germany, revised 17 Oct 2012.
  4. Muhammad, Shahbaz & Nuno, Carlos Leitão & Summaira, Malik, 2011. "Foreign direct investment-economic growth nexus: The role of domestic financial development in Portugal," MPRA Paper 34226, University Library of Munich, Germany, revised 20 Oct 2011.
  5. Greenwell Collins Matchaya & Pius Chilonda & Sibusiso Nhelengethwa, 2013. "International Trade and Income in Malawi: A Co-integration and Causality Approach," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, Technological Educational Institute (TEI) of Kavala, Greece, vol. 6(2), pages 125-147, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00517. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.