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2019 | 131 | 181-196
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Financial development indicators and FDI: international evidence

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The relationship between financial development indexes and foreign direct investment is studied in this paper. The main objective was to examine the effects of two groups of financial development indicators (the financial markets index and the financial institution index) on the FDI absorption rate. The happenstance of these indicators was evaluated in the form of panel data models for 10 countries: Saudi Arabia, Argentina, Poland, Belgium, Iran, Thailand, Nigeria, Austria, Norway and Venezuela, in the 1990 to 2017 period. The results show that when the financial institutional index, financial market index and GDP increase, the FDI increases; and when FIA, FMA & FME increase, the FDI decreases. Thus, expanding the capital market increased FDI attraction in the sample countries, and for countries with a weak capital markets, the financial market access index and the financial institution efficiency index has a significant negative effect on FDI absorption and vice versa.
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  • Department of Economics, University of Allame Tabatabae, Tehran, Iran
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