Foreign Direct Investment and Economic Growth during Financial Liberalization Episodes

Quang Ngoc Nguyen, Toan My Pham, Ramaprasad Bhar


This paper investigates the relation between foreign direct investment and economic growth under the effects of the financial liberalization processes. The paper focuses on the emerging markets, where the flows of foreign direct investment are most active and the financial liberalization processes are most intensifying. Analysis of 24 emerging markets over the 1980–2004 period shows that the easing of short-term capital flows diminishes the positive effects of foreign direct investment. The finding has important implications for policy makers in emerging markets.

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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