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Financial Competitiveness, Financial Openness and Bilateral Foreign Direct Investment

Author

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  • Na Tan
  • Wei Wang
  • Jiaohui Yang
  • Liang Chang

Abstract

In this article, we test the impacts of financial competitiveness and financial openness on bilateral FDI with novel indexes, covering 127 host countries and 122 home countries from 2009 to 2016. We find that the improvement of financial competitiveness and financial openness significantly increases the FDI assets in the home country and significantly increases the FDI liabilities in the host country. In particular, the impacts of financial competitiveness and financial openness are significant both on the intensive and extensive margins. In addition, the above results remain robust in further analyses, such as using sub-index of financial competitiveness, using quantile regression model, considering capital control on FDI and dealing with the endogenous problem. The study demonstrates the financial competitiveness and financial openness are important factors to explain why FDI positions are relatively small in some developing countries.

Suggested Citation

  • Na Tan & Wei Wang & Jiaohui Yang & Liang Chang, 2019. "Financial Competitiveness, Financial Openness and Bilateral Foreign Direct Investment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(14), pages 3349-3369, November.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:14:p:3349-3369
    DOI: 10.1080/1540496X.2019.1590194
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    Cited by:

    1. Huy Tiet Pham & Christopher Gan & Baiding Hu, 2022. "Causality between Financial Development and Foreign Direct Investment in Asian Developing Countries," JRFM, MDPI, vol. 15(5), pages 1-26, April.
    2. E P Mesagan, 2021. "Efficiency of Financial Integration, Foreign Direct Investment and Output Growth: Policy Options for Pollution Abatement in Africa," Economic Issues Journal Articles, Economic Issues, vol. 26(1), pages 1-19, March.

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