IMF Working Papers Volume 2003 Issue 186: FDI Spillovers, Financial Markets, and Economic Development (2003)

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FDI Spillovers, Financial Markets, and Economic Development

Author:

Selin Sayek

Selin Sayeknull

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Laura Alfaro

Laura Alfaronull

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Areendam Chanda

Areendam Chandanull

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Sebnem Kalemli-Ozcan

Sebnem Kalemli-Ozcannull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2003: Issue 186

Publication Date:: 01 Sep 2003

DOI:: https://doi.org/10.5089/9781451859485.001

ISBN:: 9781451859485

ISSN:: 1018-5941

Pages:: 32

Keywords:: WP; central bank; economic growth; entrepreneurial activity; financial markets; foreign direct investment; net FDI inflow; FDI enterprise; FDI share; FDI flow; FDI sector; Financial sector; Financial sector development; Stock markets; Foreign corporations; Sub-Saharan Africa; Africa

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2003: Issue 186

Language:: English

Publication Date:: 01 Sep 2003

DOI:: https://doi.org/10.5089/9781451859485.001

ISBN:: 9781451859485

ISSN:: 1018-5941

Pages:: 32

Keywords:: WP; central bank; economic growth; entrepreneurial activity; financial markets; foreign direct investment; net FDI inflow; FDI enterprise; FDI share; FDI flow; FDI sector; Financial sector; Financial sector development; Stock markets; Foreign corporations; Sub-Saharan Africa; Africa

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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This paper examines the role financial markets play in the relationship between foreign direct investment (FDI) and economic development. We model an economy with a continuum of agents indexed by their level of ability. Agents can either work for the foreign company or undertake entrepreneurial activities, which are subject to a fixed cost. Better financial markets allow agents to take advantage of knowledge spillovers from FDI, magnifying the output effects of FDI. Empirically, we show that well-developed financial markets allow significant gains from FDI, while FDI alone plays an ambiguous role in contributing to development.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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