Foreign Direct Investment, Financial Development and Economic Growth: A Panel Data Analysis
Pelaburan Langsung Asing, Pembangunan Kewangan dan Pertumbuhan Ekonomi: Analisis Data Panel

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

elyanabila@siswa.ukm.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

ahassan@ukm.edu.my

Faculty of Management and Muamalah
Kolej Universiti Islam Antarabangsa Selangor
Bandar Seri Putra
43000 Kajang, Selangor, MALAYSIA

norhakimah@kuis.edu.my

Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, MALAYSIA.

tamat@ukm.edu.my

Abstract

This study investigates the effects of financial development in enabling foreign direct investment to promote economic growth. A sample of 65 developing countries is examined over the period of 2009 to 2015 with the dynamic panel estimation by using Generalized Method of Moment (GMM). Financial development is measured using three financial indicators and an index of financial development is constructed based on the following indicators: domestic credit to private sector, liquid liabilities and private credit by banks. The results demonstrate that the financial development index contributes positively and higher than each financial development proxy in influencing the effects of FDI on economic growth. However, FDI influence negative effect in the group of countries of low level of financial development. Thus, it suggests that financial development need to be increased and serves as a form of absorptive capacity that enable the positive growth effects of FDI in the recipient countries.

Keywords

developing coutriesn; economic growth; Financial development; foreign direct investment
https://doi.org/10.17576/pengurusan-2018-51-02

Citation

Abdul Bahri, E. N., Md Nor, A. H. S., Haji Mohd Nor, N. H., & Sarmidi, T. (2017). Foreign Direct Investment, Financial Development and Economic Growth: A Panel Data Analysis. Jurnal Pengurusan, 51, 11–24. https://doi.org/10.17576/pengurusan-2018-51-02

@article{abdulbahri2017foreign,
  title={Foreign Direct Investment, Financial Development and Economic Growth: A Panel Data Analysis},
  author={Abdul Bahri, Elya Nabila and Md Nor, Abu Hassan Shaari and Haji Mohd Nor, Nor Hakimah and Sarmidi, Tamat},
  journal={Jurnal Pengurusan},
 

volume={51},
  number={},
  pages={11—24},
  year={2017},
  doi={https://doi.org/10.17576/pengurusan-2018-51-02},
  publisher={Penerbit UKM},
}

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51 (2017) 11 – 24

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