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The Effect Of Foreign Direct Investment On Financial Development: Empirical Evidence From Bahrain

Author

Listed:
  • Ayman Abdalmajeed Alsmadi

    (Al-Zaytoonah University of Jordan)

  • Mohammad Salem Oudat

    (Applied Science University Bahrain)

Abstract

The aim of this paper is to analyze the relationship between foreign direct investments and financial development in Bahrain. The estimation financial development effects was performed for the period 1978 to 2015, which covers the political conflicts that recently happened in Middle East area (Arab Spring). On the other hand, the paper sought to examine the causality relationship between foreign direct investments and financial development. The study empirically investigates the short and long run equilibrium relationship between the variables by applied co-integration and Autoregressive Distributed Lags Approach (ARDL). The Granger causality test was employed to capture causality relationship. The obtained results show that there is a significant positive relationship between FDI and financial development in short and long run, while, a significant negative relationship between Arab Spring and financial development. However, the results also revealed bidirectional causality relationship between FDI and financial development.

Suggested Citation

  • Ayman Abdalmajeed Alsmadi & Mohammad Salem Oudat, 2019. "The Effect Of Foreign Direct Investment On Financial Development: Empirical Evidence From Bahrain," Ekonomski pregled, Hrvatsko društvo ekonomista (Croatian Society of Economists), vol. 70(1), pages 22-40.
    • Handle: RePEc:hde:epregl:v:70:y:2019:i:1:p:22-40
    DOI: 10.32910/ep.70.1.2
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    Cited by:

    1. Mohammad Salem Oudat & Ayman Abdalmajeed Alsmadi & Najed Massad Alrawashdeh, 2019. "Foreign direct investment and economic growth in Jordan: An empirical research using the bounds test for cointegration," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 11(1), pages 55-63, February.

    More about this item

    Keywords

    Foreign Direct Investment; Financial Development; Domestic Credit; Bahrain; Casualty relationship;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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