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Determinants And Impact Of Financial Sector Fdi To Emerging

  • Alicia Garcia Herrero

    (Banco de España)

  • Daniel Navia Simon

    (Banco de España)

This paper reviews the theoretical literature explaining financial FDI, as well as the empirical results on the determinants of financial FDI and its potential effects for the home country. From this revision, we conclude that, at the present stage, the existing theoretical paradigms need to be adapted to explain the recent surge in international banks’ local operations in emerging countries financial sectors. Macroeconomic and risk diversification theories would seem particularly well- suited to explain this reality. The empirical literature on financial FDI has concentrated on bank-specific factors and much less so on macroeconomic determinants, particularly push factors where generally only general FDI literature is available. The survey draws on this literature in those cases where no specific results for financial FDI exist. Finally, the effects of financial FDI on the home country are virtually unknown. The literature on general FDI has focused on employment, trade and investment effects, yet the consequences on the profitability and systemic risk of home’s financial system remain a topic for debate.

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Paper provided by EconWPA in its series International Finance with number 0403001.

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Date of creation: 02 Mar 2004
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Handle: RePEc:wpa:wuwpif:0403001
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  1. Blomström, Magnus & Kokko, Ari, 1994. "Home Country Effects of Foreign Direct Investment: Evidence from Sweden," CEPR Discussion Papers 931, C.E.P.R. Discussion Papers.
  2. Ball, Clifford A. & Tschoegl, Adrian E., 1982. "The Decision to Establish a Foreign Bank Branch or Subsidiary: An Application of Binary Classification Procedures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(03), pages 411-424, September.
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  17. Claudia M. Buch, 1999. "Why Do Banks Go Abroad? ; Evidence from German Data," Kiel Working Papers 948, Kiel Institute for the World Economy.
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