Causality between FDI and financial market development : evidence from emerging markets

Authors: Soumaré, Issouf; Tchana Tchana, Fulbert
Abstract: This paper studies the causal relationship between foreign direct investment (FDI) and financial market development (FMD) using panel data from emerging markets. Most studies of the relationship between FDI and FMD have focused on the role of FMD in the link between FDI and economic growth, with no deep understanding of direct causality between FDI and FMD, especially in emerging markets, where financial markets are in the development stage. We document bidirectional causality between FDI and stock market development indicators. For banking sector development indicators, the relationship is ambiguous and inconclusive. Care is therefore needed when analysing the relationship between FMD and FDI, as results may depend on whether the FMD variables used to evaluate causality are stock market or banking sector development indicators.
Document Type: Article de recherche
Issue Date: 8 April 2015
Open Access Date: Restricted access
Document version: VoR
This document was published in: The World Bank economic review, Vol. 29, Suppl. 1, S205-S216 (2015)
International Bank for Reconstruction and Development
Alternative version: 10.1093/wber/lhv015
Collection:Articles publiés dans des revues avec comité de lecture

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