The Role of Financial Development in the Relationship between Foreign Direct Investment and Economic Growth: A Nonlinear Approach
Publish place: دوازدهمین کنفرانس بینالمللی آکادمی مدیریت آسیا
Publish Year: 1396
نوع سند: مقاله کنفرانسی
زبان: English
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شناسه ملی سند علمی:
AAMC12_130
تاریخ نمایه سازی: 22 دی 1396
Abstract:
Financial development is recognized as an absorptive capacity in the relationship between foreign direct investment (FDI) and economic growth. However, existing studies also shows that financial development dampens economic growth through the ‘too much finance’ hypothesis. Hence, there is a question of how far the financial developmentshould be developed to optimize the benefits of FDI on economic growth. Therefore, this study aims to investigate these three variables with considering the nonlinear properties of financial development on economic growth.Interestingly, our results demonstrate that the nonlinear relationship of financial development on economic growth is U-shaped curve by using the recent data period from 2009 until 2013 for 65 developing countries, which is in contrast with the past findings. This implies that financial development accelerate economic growth after it surpassed the threshold point and inherent the positive effect of FDI on economic growth to be realized. Thus, it suggests that the level of financial development needs to be increased as it serves as a form of absorptive capacity that enables the positive growth effects of FDI in the recipient countries
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Authors
Elya Nabila Abdul Bahriψ
School of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
Abu Hassan Shaari Md Nor
School of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
Tamat Sarmidi
School of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia
Nor Hakimah Haji Mohd Nor
Faculty of Management and Muamalah, Kolej Universiti Islam Antarabangsa Selangor, Malaysia