Top PDF Foreign Direct Investment in the Banking Sector: Empirical Evidence from Turkey

Foreign Direct Investment in the Banking Sector: Empirical Evidence from Turkey

Foreign Direct Investment in the Banking Sector: Empirical Evidence from Turkey

(Hymer, 1960 and 1976), the initial works of economists did not contribute to the theory of FDI because there was no difference among the types of international capital flows. In other words, FDI and FPI flows were motivated by the same factors (Forsgren, 2009). The neoclassic theory assumes that MNEs are motivated by the differences in the rate of return among countries and all countries are perfectly competitive (see, Iversen (1936) and Dunning and Rugman (1936)). Another assumption of the hypothesis is that countries cannot experience FDI inflow and outflow at the same time. Therefore, capital flows direct from a country where the rate of return is low relative to another country where the rate of return is high with respect to the theory (Moosa, 2002). For instance, the theory was partially reliable as US‟ MNEs had increased their investment to European countries where the rate of return was higher than its domestic market throughout the 1950s. However, this situation changed and the theory began to be weak to explain the investments of MNEs at the beginning of 1960s. While the US market was relatively more profitable than the markets of European countries, the investments of US origin MNCs accelerated to European countries throughout the 1960s (Hufbauer, 1975). Furthermore, while the US‟ MNEs were investing in European countries during the 1950s, especially UK origin MNEs mostly invested in the US market where the interest rate was relatively low. Therefore, such theory had not been appropriate to explain the direct investment of MNCs. Another problem in this theory is that the reported profit was used to calculate the rate of return instead of using expected or actual profit to calculate the rate of return to explain FDI. Realised profit and profit earned throughout a year (which was used to test the hypothesis) may not be equal. The neoclassic theory also assumed that technological developments of countries were homogeneous, only capital and labour were taken into account as an input. In this situation, less developed countries where technological development was also low, would
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Causality between Tourism and Foreign Direct Investment: An Empirical Evidence from Pakistan

Causality between Tourism and Foreign Direct Investment: An Empirical Evidence from Pakistan

The government of Pakistan is increasingly concentrating on the revival of the tourism sector in Pakistan. The government is implementing cohesive policies to appeal the tourists. The tourism sector in Pakistan can greatly stimulate the economic status of Pakistan. Aleemi and Qureshi (2015) determined that receipts from tourism significantly and positively influence Pakistan’s economic development. The government is encouraging investment friendly environment for foreign investment in order to strengthen foreign reserves and accelerate the economic progression of the country. Emergent economies have formulated welcoming FDI policies and strategies and witnessed visible growth (Zheng, 2011). A number of countries around the world have found an association between tourism and FDI. Katircioglu et al. (2018) found reinforcing interaction and long run affiliation between tourism development and financial development in Turkey. This research will fill the gap in the literature by analyzing the long term and short term association between tourism and FDI along with macro-economic variables in Pakistan and will help the government in designing policies.
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Determinants of Foreign Direct Investment: Empirical Evidence from Saudi Arabia

Determinants of Foreign Direct Investment: Empirical Evidence from Saudi Arabia

The Saudi government has significantly invested in improving the national infrastructure so it can attract not only FDI but also provide employment opportunities to the national youth. The wide-scale privatization in the wholesale and retail sectors attracted immense FDI in the last decade. To tackle the decline of FDI in 2017, the Saudi government relaxed the entry restrictions on foreign investors in 2018, so that a $500m investment is now required as opposed to the previous $1b requirement [11]. The controlled inflation, stable exchange rate, efficient banking sector, and extensive privatization are some of the factors that could drive an increase in FDI inflows [12]. High GDP per capita, low energy costs, and the biggest oil reserves prove Saudi Arabia as a relatively better option for foreign investors in the MENA region [13]. This study aims to explore the various determinants of FDI in the context of the KSA, as have been highlighted by the previous research, to provide a statistically proven and more reliable model for measuring the impact of the primary factors on FDI inflows.
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Foreign Direct Investment and Agglomeration: Evidence from Italy

Foreign Direct Investment and Agglomeration: Evidence from Italy

As regards the empirical analysis on agglomeration and FDI two considerations are in order. First, in choosing the appropriate proxy for agglomeration the literature does not follow a unified approach. Instead, the models use different measures of agglomeration only sometimes sector specifics. Among the works that use non-industry specific variables, we recall Coughlin et al. (1991) and Wei et al. (1999) that use proxies for density, respectively approximated by the manufacturing employment, or population, to land area ratio. Others consider the weight of manufacturing sector: Woodward (1999) and Basile (2001) use the total number of manufacturing establishments within the area, while Wheeler and Mody (1992) and Billington (1999) the degree of industrialization, in turn measured by the weight of manufacturing sector as percent of GDP. Other similar proxies for agglomeration include infrastructures endowments and FDI previously accumulated (e.g. Wheeler and Mody, 1992). On the other hand, certain studies consider explicit industry specific proxies for agglomeration more strictly related to the so-called MAR externalities. More specifically, Braunerhjelm and Svensson (1996) employ a sectoral specialization index, given by the ratio of sectoral employees to total manufacturing employees, while Head et al. (1994, 1995) the number of foreign plants already located in the area belonging to the same sector and country of origin.
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Financial Development, Foreign Direct Investment and Banking Sector Performance: An Evidence from African Countries with Stock Exchange Market

Financial Development, Foreign Direct Investment and Banking Sector Performance: An Evidence from African Countries with Stock Exchange Market

statistically significant relationship with banking sector performance (lnroe), lnfdi also showed negative and significant relationship with banking sector performance (lnroe). From the result, it is evidenced that domestic credit to private sector and foreign direct investment do not positively impact banking sector performance in the sample of the study. In comparison, using return on assets (lnroa) as dependent variable, financial development showed negative and significant relationship with banking sector performance (lnroa) whiles foreign direct investment showed insignificant in model 2 which did not consider the existence of domestic credit to private sector (financial development) but in model 3 which combined the two variables in one model showed that foreign direct investment has negative and statistically significant relationship with banking sector performance (lnroa). Moreover, gross domestic product per capita which was considered to assess the economic growth impact on banking sector performance showed that in model 1&2 by using lnroe as dependent variable lngdppc (economic growth) has negative and statistical significant relationship with banking sector performance but model 3 showed positive and statistically significant relationship taking into consideration both lndcp (financial development) and lnfdi (foreign direct investment). On the other hand, the result of using lnroa (return on assets) as dependent variable showed the same result as lnroe. However, regulation quality (regqty) which is referred to as the quality of policies and implementation of the policies to enable the private sector to thrive and corruption control (corco) showed positive and significant relationship with banking sector performance (lnroe and lnroa) but insignificant in model 3 with lnroe as dependent variable. Meanwhile, government effectiveness (goveff) as in the quality of policies formulated and their implementations showed negative and significance in model 1&2 with lnroe as dependent variable and model 2&3 with lnroa as dependent variable.
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Exports, foreign direct investment and economic growth: Empirical evidence from Malaysia (1971-2013)

Exports, foreign direct investment and economic growth: Empirical evidence from Malaysia (1971-2013)

The main objective of this study is to empirically investigate the relationship between exports, Foreign Direct Investment (FDI) and the economic growth in Malaysia. Records of annual time series data from the year 1971 till 2013 have been utilized for this purpose. Upon testing the data for stationarity, the Auto Regressive Distributed Lag (ARDL) model has been applied for the purpose of empirical investigation. The empirical results indicate that the productivity factor and externality effect of exports on the non-export sector are found to be statistically, positively significant, with the exports also having a positive impact on the economic growth and FDI of the country. The results support Exports Led Growth (ELG) and FDI-Led economic Growth (FLG) in Malaysia. The finding further suggests that Malaysia should continuous pursue exports promotion and a liberal investment economic policy in order to maintain and bolster overall economic growth.
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Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

Our third measure is the log of total employment in the tertiary sector (business and financial services) per square kilometer. This variable captures service agglomeration economies. As RIVERA-BATIZ (1988) demonstrates in a formal setting, such economies should positively affect firm location. This is because, in equilibrium, the larger the number of service sector firms in the market, the more specialized the producer services that they can provide, the smoother the industrial production that can be sustained and the higher therefore the productivity of the industrial sector. WOODWARD (1992) argues that economies arising from urban service agglomeration may be particularly important for foreign investors as professional services (such as accountants and lawyers) and a diverse range of cultural amenities are crucial input factors in production for them. As argued in the introduction, this reasoning may be particularly applicable to transition economies, as the various non-core business problems that require professional services are more pronounced in these countries.
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Effects of Foreign Direct Investment on GDP: Empirical Evidence from Developing Country

Effects of Foreign Direct Investment on GDP: Empirical Evidence from Developing Country

On the basis of our findings, the major conclusion that can be drawn from the study is that Bangladesh is yet to fully reap the benefits of FDI, as its impact on growth at the moment is very little. However, hopes are the rifts that if round pegs are put in round holes, the anticipated benefits of FDI will begin to manifest in Bangladesh. We, therefore, recommend that the level of security at all levels in the country should be overhauled in order to boost indigenous private and foreign investors' confidence as instability in any nation scare away prospective investors. Furthermore, the foreign sector in Bangladesh should be liberalized, all barriers to trade that are inimical to cross- border trade such as arbitrary tariffs; import and export duties and other levies should be reduced to the bearest minimum or, if possible, removed. There should be a clear guideline in government policy regarding priority sectors that require foreign investments in Bangladesh among which sectors like agriculture and manufacturing should be uppermost for development. The spill-over effects of the development of these sectors would be the manifold increase in the rate of employment, GDP and output, food supply and raw materials for industries (especially local ones) and foreign exchange earning etc. Researchers’ recommendations are given below ---
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Causality between Foreign Direct Investment and Tourism : Empirical Evidence from India

Causality between Foreign Direct Investment and Tourism : Empirical Evidence from India

The development of the tourism sector needs investment in many forms and FDI is one such source. This introduces a causal link from FDI (to this sector and hence overall) to tourist arrivals as this attracts greater numbers of visitors due to better amenities. A further indirect link from FDI to tourism is through business tourists. These are entrepreneurs and managers from other countries who, while looking for opportunities to invest in India as well as to promote and sustain business in India visit several tourist destinations. This in turn is likely to boost FDI into this sector as well as other related sectors to improve the quantum and quality of service provided wherever lacking. Consequently there is a reverse causality that links tourism to FDI. Tourism is also one of the few sectors where 100 percent FDI has been permitted by the government of India recently.
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How Does Foreign Direct Investment Promote Economic Growth? Empirical Evidence from Pakistan

How Does Foreign Direct Investment Promote Economic Growth? Empirical Evidence from Pakistan

The fact and figures supported that the manufacturing sector in the first era were growing very rapidly in East and West Pakistan, but on the other side the other main and important agriculture sector were moving in opposite direction. The growth rate of agriculture sector was declining in the first years of the first decades. The annual growth rate of agriculture was 2.6% in 1050-51, while it became negative and was -9.1% in 1951-52. In 1952-53 this growth rate increase to 0.2 % but it again became -0.8 in 1954-55.so therefore, It was very difficult for a newly born state to coup up these along with some other critical problems. As Pakistan was one of the new country and was considered agriculture country in the word. And mostly people lived in rural areas and their source of income is only agriculture, means they are dependent mostly on agriculture sector. About 75% of the total population lived in rural areas, 65% of which are connected with agriculture sector. Low growth rate in agriculture not only affect the income of the people but disturbed the industrial sector as well.
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Foreign Direct Investment and Technology Spillovers: Evidence from The Indian Manufacturing Sector

Foreign Direct Investment and Technology Spillovers: Evidence from The Indian Manufacturing Sector

The empirical studies on spillover effects of FDI are based on the notion that MNCs possess superior organisational and production techniques compared to the domestic firms (Hymer 1976). MNCs can transfer technology through various means like licensing, trade, FDI, subcontracting, franchising and strategic alliances. Nevertheless, the preferred mode of technology transfer is through foreign direct investment since it can internalise the transfer of superior technological assets at little or no extra cost (Caves 1996). In addition, FDI is considered as the best means to keep control over the technological knowledge. Since the technology has the characteristic of a public good, a part of the technology spills from the MNC subsidiaries to the domestic firms. The spillovers can be in the form of improvement in the productivity of the domestic firms. This is neo-classical view on spillover effects § . The spillover effects from the FDI can be broadly classified as horizontal (sectoral) and vertical (inter-sectoral) spillover. The commonly identified channels of spillover from MNCs are illustrated in the figure below. We examine both horizontal and vertical spillovers in detail below.
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Foreign direct investment and agglomeration: evidence from Italy

Foreign direct investment and agglomeration: evidence from Italy

A number of empirical studies have analyzed the effect of agglomeration on multinational investment, verifying whether the agglomerated areas attract foreign direct investment inflows. Despite the large number of papers, no systematic attempt has been made to disentangle whether FDI are attracted by the concentration of firms within the same sector (specialization) or within different sectors (diversity). Furthermore, the question whether firm size in the host area influences multinational investment is still unanswered. This paper provides empirical evidence of the role of agglomeration economies in attracting foreign direct investments within Italian regions and provinces, distinguishing between specialization and diversity, and of the role of firm size in foreign investors’ choices. We employ a new territorial data set on foreign direct investment collected by the Italian Foreign Exchange Office for industrial and service sectors. We find strong evidence that specialized geographical areas attract FDI, whereas diversified areas do so only for industrial sectors; finally, there is little evidence that firm size has an impact on FDI since, if anything, only big firms in southern regions appear to have a positive effect on foreign investors’ decisions. JEL classification: F21, R12, R30.
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Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania

Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania

To estimate the model outlined above, we obtained unique data from four Romanian sources. First, the “Statistical Abstract of Romania” provides detailed information on many of the county-level characteristics that are expected to play a role in the firms’ location decisions (e.g., employment and average net monthly earnings by economic sector, unemployment rate, number of labor conflicts, school population of various levels of education, railway lines in operation, public roads, land area). Second, we obtained data from the Romanian Development Agency (RDA). The RDA maintains the most complete and reliable list of establishments with foreign participation for Romania, as it registers each and every establishment with foreign participation, which opened in the country. Specifically, the RDA provided us with information on the date of establishment, county of location, partners, amount of foreign and total capital invested, and relevant industry for all foreign manufacturing subsidiaries with at least $10,000 in foreign capital which were established in Romania between 1990 and 1997. In order to ensure that the sample of foreign plants used in the analysis includes only greenfields, we eliminated all establishments in which the Romanian partner was a juridical person (i.e., a firm). RDA staff indicated to us that some of these establishments with a firm as domestic partner may represent joint ventures or acquisitions. Third, we supplemented our data with plant-level information from the Chamber of Commerce and Industry of Romania (CCIR), including the county of location and two-digit industry code for all domestic manufacturing plants with at least 20 employees for 1994 and 1996. Finally, we derived sector specific regional annual employment and GDP data from the National Institute of Statistics. 3
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The Relationship Between Corruption and Foreign Direct Investment Inflows in Turkey: An Empirical Examination

The Relationship Between Corruption and Foreign Direct Investment Inflows in Turkey: An Empirical Examination

corrupt countries. Campos and Lien (1999, p. 1065) state that corruption reduces the ratios of both local and foreign gross investments to GDP. However, it is emphasized that the mentioned effect decreases by the predictability of the corruption. Wei (2000, pp. 316-317) concludes that the triggering effect of corruption on FDI is higher relative to the negative effect of tax increase which is used as another control variable in the study. Wei and Smarzynska (2000, pp. 4-5) assert that foreign investors canalized to the economies with high corruption are in search of local partners, and that corruption triggers the union of the companies which are joint venture type. Abed and Davoodi (2000, pp. 14-15) suggest that corruption as a factor that decreases institutional quality hampers FDI inflows. Habib and Zurawicki (2001, pp. 687-700), which is one of the studies that analyzes the effects of corruption on local and global investments, reach a conclusion that the effect of corruption on foreign investments is more significant in comparison to the impact on local investments. On the other hand, Lambsdorff (2003, pp. 229-243) finds evidence supporting that corruption shows negative effects on for- eign investment inflows rather than on the local investments.
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An Empirical Relationship between Foreign Direct Investment and Economic Growth: Evidence from India

An Empirical Relationship between Foreign Direct Investment and Economic Growth: Evidence from India

According to UN report, India is the third most favored destination for investment after China and the US for major global companies. The report further expects that foreign investment in India could increase by more than 20% in 2012-1213. India needs foreign capital due to inadequate domestic capital and also for economic development. FDI is generally known to be the most stable component of capital flows needed to finance the current account deficit. India has become an investment hub over last decade. The major areas of FDIs are- oil, mining, coal and gas, banking, insurance, transportation, finance, manufacturing, retailing etc. FDI is significant to India as an engine of growth.
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Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia

Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia

Some business fields are restricted to both domestic and foreign investment with eight fields that are closed only to foreign investment. Those are: Germ plasma cultivation, concession for natural resources, contractors in the field of lumbering, taxi/bus transportation, small scale sailing, trading and trading supporting services, radio and television broadcasting services providers, and motion picture production industry. 13 Since the Foreign Investment Law was enacted in 1967 until July 2006, the government of Indonesia has approved FDI inflows with total value of US$ 315.22 trillion in 15,395 projects. Approved FDI inflows have increased during the last three decades from US$ 38.6 billion in 1967 to US$ 119.3 billion in 1997. This trend has decreased to US$ 53.9 billion in 1999, but gradually increased to US$ 318.3 billion on July 2006. Table 2 provides data on approved foreign investments up to 2006. During the period 1997-2006, the largest amount in terms of value of approved investment was to the secondary sector reaching the value US$ 208.5 billion. It has contributed 65.5 percent of total approval value of FDI. Moreover, approved Investments in both tertiary and primary sectors was very small with total value US$ 79.5 billion and US$ 30.3 billion or 25 percent and 9.5 percent of total, respectively.
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Foreign Direct Investment:  A Journey To Economic Growth In Ghana - Empirical Evidence

Foreign Direct Investment: A Journey To Economic Growth In Ghana - Empirical Evidence

of this, the government has sought help from the IMF and the World Bank to provide assistance for debt management issues and the government has committed to use debt financing for projects that can generate revenue to repay the debt service. Ghana has demonstrated its commitment to strengthen governance. It has maintained or improved its rating on most governance indicators; especially in participation of human rights, public management and human development. Steps have also been taken to improve transparency and accountability. In Ghana, the private sector is being dominated by the informal sector with approximately 90% of the companies being MSMEs. The private sector is the main employer and the primary generator of exports. Its contribution to real GDP is estimated at about 22%. The government has been actively improving the country’s business environment. Despite the government support to the business environment, the private sector still faces issues that have confronted the development of the private sector. These include infrastructural weaknesses, cumbersome public administration structures, underdeveloped financial systems’ low access to technology, and weak human capital. Ghana is an active member of key regional integration arrangements in West Africa and in the continent, including the African Union, the Economic Community of West African States, and the West African Monetary Zone1. It also maintains good relations with its traditional trading partners and donors, especially the US and UK, both of which have a large Ghanaian Diasporas (African Development Fund, 2012).
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Banking Sector Operations and Foreign Direct Investment in Nigeria: A Causality Analysis

Banking Sector Operations and Foreign Direct Investment in Nigeria: A Causality Analysis

This study examined the causality relationship between banking sector operations in Nigeria and foreign direct investment from 1997 to 2015. The causal relationship between Foreign Direct Investment (FDI) and banking sector development in Nigeria is not clear yet, while there abounds empirical and theoretical studies on the nexus between foreign direct investment and economy in general, considerable attempts has not been made on the causality relationship between and banking operations in Nigeria. Specifically, this study ascertained the causal relationship between banking sector deposits, loans and advances, foreign exchange transactions, domiciliary operations, international banking operations and foreign direct investment. To achieve these objectives, this study employed Ordinary Least Square (OLS) econometric technique, Auto Regressive Distributive Lag (ARDL) bound test and granger causality test among others. Secondary data were collected from Central Bank of Nigeria statistical bulletin of 2015. The result indicated significant causal bidirectional relationship between banking sector deposits, foreign exchange transactions and foreign direct investments; a significant unidirectional causal relationship between domiciliary operations and foreign direct investment, while no significant causal relationship existed between loans and advances, international banking operations and foreign direct investment. The study recommends that banking sector should adopt completely smart banking as this evidences low risk, reliability and stability of the banking sector which is essential for inflow of foreign direct investments. Central Bank of Nigeria should cautiously focus on tackling monetary policy variables such monetary policy rate, cash reserve ratio and loan portfolio which a capable of attracting investors from abroad.
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An empirical analysis of the relationship between foreign direct investment and unemployment rate : evidence from Turkey

An empirical analysis of the relationship between foreign direct investment and unemployment rate : evidence from Turkey

The relationship between Foreign Direct Investment (FDI) and unemployment rate (UEMP) has been a topic of discerning researches in the last years. The empirical studies gave the various results due to analyzed country, amount of series and applied empirical models. Thus, in some research it has been found that FDI has a positive impact on decreasing the unemployment rate and vice versa. For instance, Brincikova and Darmo (2014) analyzed the impact of FDI inflows on employment of V4 countries by using panel data for a time period from 1993 to 2012 through panel regression analysis. According to the results, it has been found that there is the positive effect of FDI inflows on employment in V4 Countries. Djambaska and Lozanoska (n.d.), examined the relationship between unemployment and foreign direct investment (FDI) in the Republic of Macedonia for the period 1999-2013. The multiple linear regression analysis has been employed in the statistical part of the paper.
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FOREIGN DIRECT INVESTMENT, FINANCIAL SECTOR DEVELOPMENT & ECONOMIC GROWTH: EMPIRICAL EVIDENCE ON LINKS FROM GHANA

FOREIGN DIRECT INVESTMENT, FINANCIAL SECTOR DEVELOPMENT & ECONOMIC GROWTH: EMPIRICAL EVIDENCE ON LINKS FROM GHANA

The problem at hand now is research to date has established that the conditions required to attract inward FDI includes political and macroeconomic stability, good taxation and investment policies and improved infrastructure. Although, these conditions are necessary to attract FDI, they may not be sufficient as the market for FDI becomes increasingly competitive. Barro (1990) contributed that, financial liberalization and stabilization must be undertaken by host countries before any increases in FDI become feasible. Alfaro et al. (2004) found that FDI promotes economic growth in economies with sufficiently developed financial markets. New developments have also indicated the volatility of FDI has called for important macroeconomic and financial adjustments. Choong et al (2004) studied into foreign direct investment, economic growth and financial sector development (a comparative analysis) and found out that, in all the countries under study, both FDI and economic growth are not co-integrated by themselves directly but rather through their dynamic interaction with the development of the domestic financial sector. Furthermore, their results proved that the presence of FDI inflows creates a positive technological diffusion in the long run only if the evolution of the domestic financial system has achieved a certain minimum level. Therefore, this study seeks to examine the significance of the development of the financial sector in affecting the link between FDI and economic growth in Ghana.
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