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Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-Generation Techniques

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  • Shoukat Iqbal Khattak

    (Jimei University)

  • Waseem Ahmad Khan

    (The Islamia University of Bahawalpur)

Abstract

Even though global foreign direct investment (FDI) and international foreign portfolio investment (IFPI) flows have recently declined, they remain a significant foreign capital source for developing countries. This study assessed the impact of Chinese FDI (CFDI) and IFPI on financial development (FD) in the BRI economies from 2006 to 2018. The study adds to the current literature that lacks an updated and comprehensive study on the combined effect of Chinese FDI and IFPI on financial development among the Belt and Road economies. This study uses third-generation estimation methods. The results indicated that CFDI and IFPI have a significant positive effect on the financial sector development among BRI countries. The present findings contribute to the current literature by establishing a bidirectional causal flow from FD to Chinese FDI and IFPI. A comparative analysis of OBOR countries revealed that Europe and the Middle East have comparatively more significant structural breaks suggesting a longer recovery from the economic shocks.

Suggested Citation

  • Shoukat Iqbal Khattak & Waseem Ahmad Khan, 2024. "Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-G," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 3014-3038, March.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:1:d:10.1007_s13132-023-01151-w
    DOI: 10.1007/s13132-023-01151-w
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