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Financial Globalization and Foreign Direct Investment

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  • Steven Poelhekke

    (VU University Amsterdam, The Netherlands)

Abstract

This chapter provides a broad overview of the upward trends in financial globalization and foreign direct investment and asks whether and how financial globalization is linked with the foreign direct investment decisions of non-financial multinational enterprises. Several potential links and their empirical support in the recent literature are discussed: the elements of foreign direct investment that require (global) financial services; the role of trade credit; and the question whether banks follow their customers abroad. Finally, the effect of the recent financial crisis is discussed. It finds that financial globalization provides a reduction in broadly defined transaction costs which can boost both trade and foreign direct investment, at the costs of more exposure of the real economy to financial shocks.

Suggested Citation

  • Steven Poelhekke, 2016. "Financial Globalization and Foreign Direct Investment," Tinbergen Institute Discussion Papers 16-098/VIII, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20160098
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    More about this item

    Keywords

    foreign direct investment; financial globalization; banks;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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