Showing papers on "Financial sector development published in 1961"
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TL;DR: In this article, the authors examined the link between FDI, domestic financial system, and economic growth for Pakistan over the period of 1972-2005 and found that FDI inflows exerted positive impact on economic growth in the short-run and the long-run if the domestic financial systems had achieved a certain minimum level development.
Abstract: Recent theoretical and empirical literature suggests that
foreign direct investment (FDI) exerted positive impact on economic
growth through the process of technological diffusion. The literature
also suggests that the development of the domestic financial system of
the host country is an important pre-condition for FDI to have a
positive impact on economic growth. A welldeveloped domestic financial
sector enhances efficient allocation of financial resources and improves
the absorptive capacity of a country with respect to FDI inflows.
Particularly, a more developed financial system positively contributes
to the process of technological diffusion associated with foreign direct
investment. In this study, we examine the link between FDI, domestic
financial sector, and economic growth for Pakistan over the period
1972–2005. Empirical analysis is based on the bound testing approach of
cointegration advanced by Pesaran, et al. (2001). The results suggest
that FDI inflows exerted positive impact on economic growth in the
short-run and the long-run if the domestic financial system has achieved
a certain minimum-level development. The results further suggest that
better domestic financial conditions not only attract foreign companies
to invest in Pakistan, but also allow maximising the benefits of foreign
investment. JEL classification: F21, F36, F43, O16 Keywords: Foreign
Direct Investment, Financial Sector Development, Economic Growth,
Technology Spillovers
102 citations