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Korea Trade Research Association (한국무역학회)
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The Effects of Financial Development on Foreign Direct Investment

금융 발전이 외국인직접투자에 미치는 영향에 대한 분석

  • Jung-Whan Cho (Institute for Future Growth, Korea University) ;
  • Tae-Hwang Kim (Department of International Business & Trade, Myongji Univesity)
  • 조정환 (고려대학교 미래성장연구소) ;
  • 김태황 (명지대학교 국제통상학과 )
  • Received : 2020.08.01
  • Accepted : 2020.08.28
  • Published : 2020.08.31
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Abstract

This study investigates the effects of financial development on the foreign direct investment (FDI) flow in host countries. Using bilateral FDI data from 34 OECD source countries to 146 host countries, we performed panel data analysis based on a gravity FDI equation. We hypothesized that the financial development would increase the volume of FDI flows. The results suggest that the well-functioning finance market of source countries as well as a better accessable financial market of host countries contribute to the increase in FDI of OECD in their partner countries. We found also that the financial development effects of source countries are larger than those of host countries. This result shows that the financial development can play a crucial role to impact the FDI inflows as push factor in source country than as a pull factor in host countries.

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