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Financial-sector foreign direct investment and host countries: new and old lessons

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Linda Goldberg

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Abstract

Many of the lessons from foreign direct investment (FDI) research on manufacturing and extractive resource industries are applicable to FDI research on the financial sector. This paper summarizes the main findings and policy themes of FDI research, with a primary focus on the implications of FDI for host countries, especially emerging market economies. I review evidence of technology transfers, productivity spillovers, wage effects, macroeconomic growth, and fiscal and tax concerns. Throughout this paper, I stress that parallel findings often arise from studies of general FDI and studies of financial-sector FDI. I also emphasize important differences between the effects of FDI in these sectors, especially with regard to local institution building and business cycles. These differences-more so than the similarities-should be the focus of research efforts.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 183.

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Date of creation: 2004
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Handle: RePEc:fip:fednsr:183

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Keywords: Investments; Foreign ; Technology ; Economic development ; Financial services industry;

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  4. Hali J. Edison & Michael W. Klein & Luca Ricci & Torsten Sloek, 2002. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," NBER Working Papers 9100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Stallings, Barbara & Studart, Rogerio, 2002. "Financial Regulation and Supervision in Emerging Markets. The Experience of Latin America since the Tequila Crisis," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  8. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May. [Downloadable!] (restricted)
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  9. B. Gerard Dages & Linda Goldberg & Daniel Kinney, 2000. "Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 17-36. [Downloadable!]
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  11. Linda S. Goldberg & Michael W. Klein, 1999. "International Trade and Factor Mobility: An Empirical Investigation," NBER Working Papers 7196, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Robert E. Lipsey & Fredrik Sjoholm, 2003. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis With Panel Data," NBER Working Papers 9417, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  24. Charles W. Calomiris & Andrew Powell, 2000. "Can Emerging Market Bank Regulators Establish Credible Discipline? The Case of Argentina, 1992-1999," NBER Working Papers 7715, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  27. ter Wengel, Jan, 1995. "International trade in banking services," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 47-64, February. [Downloadable!] (restricted)
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  30. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June. [Downloadable!]
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  31. Barajas, Adolfo & Steiner, Roberto & Salazar, Natalia, 2000. "The impact of liberalization and foreign investment in Colombia's financial sector," Journal of Development Economics, Elsevier, vol. 63(1), pages 157-196, October. [Downloadable!] (restricted)
  32. M. Ayhan Kose & Eswar Prasad & Marco Terrones, 2003. "Volatility and Comovement in a Globalized World Economy: An Empirical Exploration," IMF Working Papers 03/246, International Monetary Fund. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Marc Ruhr & Michael Ryan, 2005. "“Following” or “attracting” the customer? Japanese Banking FDI in Europe," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 405-422, December. [Downloadable!] (restricted)
  2. Daniel Esteban Osorio Rodríguez & Mauricio Avella Gómez, 2005. "The Ciclical Behavior Of External Indebtedness: The Case Of Foreign And Domestic Banks In Colombia," BORRADORES DE ECONOMIA 003571, BANCO DE LA REPÚBLICA. [Downloadable!]
  3. Eswar S. Prasad & Raghuram Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," NBER Working Papers 14051, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Daniel Esteban Osorio Rodíguez & Mauricio Avella Gómez, . "The Cyclical Behavior of External Indebtedness: The Case of Foreign and Domestic Banks in Colombia," Borradores de Economia 345, Banco de la Republica de Colombia. [Downloadable!]
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