FDI Spillovers, Financial Markets, and Economic Development

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 acti...

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Bibliographic Details
Main Author: Sayek, Selin
Other Authors: Alfaro, Laura, Chanda, Areendam, Kalemli-Ozcan, Sebnem
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2003
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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260 |a Washington, D.C.  |b International Monetary Fund  |c 2003 
300 |a 32 pages 
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653 |a Multinationals 
653 |a Stock exchanges 
653 |a Investments, Foreign 
653 |a Finance 
653 |a Industries: Financial Services 
653 |a Financial Aspects of Economic Integration 
653 |a Balance of payments 
653 |a Long-term Capital Movements 
653 |a Exports and Imports 
653 |a General Financial Markets: General (includes Measurement and Data) 
653 |a Multinational Firms 
653 |a Economic sectors 
653 |a Corporate Finance 
653 |a Economic Growth of Open Economies 
653 |a Financial markets 
653 |a Foreign corporations 
653 |a Stock markets 
653 |a International Business 
653 |a Financial Institutions and Services: General 
653 |a Financial Markets and the Macroeconomy 
653 |a Financial services industry 
653 |a Financial sector development 
653 |a Finance: General 
653 |a International Investment 
653 |a Foreign direct investment 
653 |a Financial sector 
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700 1 |a Chanda, Areendam 
700 1 |a Kalemli-Ozcan, Sebnem 
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520 |a 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