Foreign Direct Investment-Economic Growth Nexus: The Role of Domestic Financial Development in Portugal
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.
Volume (Year): 31 (2011)
Issue (Month): 4 ()
|Contact details of provider:|| |
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.:
- James R. Markusen & Anthony J. Venables, 1997.
"Foreign Direct Investment as a Catalyst for Industrial Development,"
NBER Working Papers
6241, National Bureau of Economic Research, Inc.
- Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
- Paul Turner, 2006. "Response surfaces for an F-test for cointegration," Applied Economics Letters, Taylor & Francis Journals, vol. 13(8), pages 479-482.
- Inder, Brett, 1993. "Estimating long-run relationships in economics : A comparison of different approaches," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 53-68.
- Ang, James B. & McKibbin, Warwick J., 2007.
"Financial liberalization, financial sector development and growth: Evidence from Malaysia,"
Journal of Development Economics,
Elsevier, vol. 84(1), pages 215-233, September.
- James B. Ang & Warwick J. McKibbin, 2005. "Financial Liberalization, Financial Sector Development And Growth: Evidence From Malaysia," CAMA Working Papers 2005-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- King, Robert G. & Levine, Ross, 1993.
"Finance and growth : Schumpeter might be right,"
Policy Research Working Paper Series
1083, The World Bank.
- Jeannine N. Bailliu, 2000.
"Private Capital Flows, Financial Development, and Economic Growth in Developing Countries,"
Staff Working Papers
00-16, Bank of Canada.
- Bailliu, Jeannine N., 2000. "Private Capital Flows, Financial Development, and Economic Growth in Developing Countries," Staff Working Papers 00-15, Bank of Canada.
- Muhammad Shahbaz & Nuno Carlos leitão & Summaira Malik, 2011.
"Foreign Direct Investment-Economic Growth Nexus: The Role of Domestic Financial Development in Portugal,"
AccessEcon, vol. 31(4), pages 2824-2838.
- 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.
- Christer Ljungwall & Junjie Li, 2007. "Financial Sector Development, FDI and Economic Growth in China," Finance Working Papers 22026, East Asian Bureau of Economic Research.
- 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, vol. 0(1 & 2), pages 103-123, March & J.
- Ronald Findlay, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, Oxford University Press, vol. 92(1), pages 1-16.
- Lipsey, Robert & Sjöholm, Fredrik, 2004. "Host Country Impacts Of Inward Fdi: Why Such Different Answers?," EIJS Working Paper Series 192, The European Institute of Japanese Studies.
- James Ang, 2009. "Financial development and the FDI-growth nexus: the Malaysian experience," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1595-1601.
- Isaac Ehrlich, 1973.
"The Deterrent Effect of Capital Punishment: A Question of Life and Death,"
NBER Working Papers
0018, National Bureau of Economic Research, Inc.
- Ehrlich, Isaac, 1975. "The Deterrent Effect of Capital Punishment: A Question of Life and Death," American Economic Review, American Economic Association, vol. 65(3), pages 397-417, June.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998.
"How does foreign direct investment affect economic growth?1,"
Journal of International Economics,
Elsevier, vol. 45(1), pages 115-135, June.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- 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, vol. 0(1), pages 65-80, January.
- Ehrlich, Isaac, 1977. "The Deterrent Effect of Capital Punishment: Reply," American Economic Review, American Economic Association, vol. 67(3), pages 452-58, June.
- Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
- Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
- Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
- Areendam Chanda & Laura Alfaro & Sebnem Kalemli-Ozcan & Selin Sayek, .
"How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages,"
Departmental Working Papers
2006-13, Department of Economics, Louisiana State University.
- Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc.
- Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," DEGIT Conference Papers c011_023, DEGIT, Dynamics, Economic Growth, and International Trade.
- 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.
- 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., vol. 16(3), pages 289-326.
- Edwin Mansfield & Anthony Romeo, 1980. "Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 95(4), pages 737-750.
- 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.
- Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002.
"FDI and Economic Growth: The Role of Local Financial Markets,"
- 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, vol. 64(1), pages 89-112, October.
- Kokko, Ari & Blomstrom, Magnus, 1995.
"Policies to encourage inflows of technology through foreign multinationals,"
Elsevier, vol. 23(3), pages 459-468, March.
- Magnus Blomstrom & Ari Kokko, 1993. "Policies to Encourage Inflows of Technology Through Foreign Multinationals," NBER Working Papers 4289, National Bureau of Economic Research, Inc.
- 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, vol. 42(4), pages 715-723.
- Signe Krogstrup & Linda Matar, 2005. "Foreign Direct Investment, Absorptive Capacity and Growth in the Arab World," IHEID Working Papers 02-2005, Economics Section, The Graduate Institute of International Studies.
- James Ang, 2009. "Foreign direct investment and its impact on the Thai economy: the role of financial development," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(3), pages 316-323, July.
- King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
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.