Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128141
Authors: 
Donaubauer, Julian
Neumayer, Eric
Nunnenkamp, Peter
Year of Publication: 
2016
Series/Report no.: 
Kiel Working Paper 2029
Abstract: 
We estimate gravity-type models to assess the effects of financial market development in the host and source countries on bilateral FDI stocks. We address potential reverse causality, inter alia by performing instrumental variable estimations and restricting the sample to observations where reverse causality, if existent, should be less relevant. Our major and robust finding is that bilateral FDI increases with better developed financial markets in both the host and the source country. Furthermore, for developing host countries, we find evidence that financial market development in source and host countries function as substitutes for each other.
Subjects: 
foreign direct investment
financial market development
gravity model
JEL: 
F21
G20
O16
Document Type: 
Working Paper

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