Foreign Direct Investment, Financial Development, and Economic Growth: Evidence from the Arab Countries
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Mohammed Omran
The emerging literature on foreign direct investment (FDI) now stipulates that FDI’s positive impact on growth depends on absorptive capacities. Prime among these capacities is financial development. The paper provides support to this thesis in the context of the Arab countries whose financial system is predominantly bank-based. It finds that Arab FDI will have a favorable effect on growth if interacted with financial variables at a given threshold level of development. It also finds that in reform countries FDI could Granger cause financial development. The conclusions that emerge from the paper are that domestic financial reforms should precede policies promoting FDI, investment measures should enhance the environment for all investors—foreign and domestic alike—and liberal commercial policies should be designed as initial measures to attract FDI.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Labor-use Efficiency in Tunisian Manufacturing Industiries
- H-O for H2O: Can the Heckscher-Ohlin Framework Explain the Role of Free Trade in Distributing Scarce Water Resources Around the Middle East?
- Foreign Direct Investment, Financial Development, and Economic Growth: Evidence from the Arab Countries
- Is Long Memory a Property of Thin Stock Markets? International Evidence Using Arab Countries
- Equity Valuation Using Multiples in the Emerging Market of the United Arab Emirates
