FDI and Financial Market Development in Africa
Foreign direct investment and Financial Market Development in Africa
Abstract
The literature on the relationship between foreign direct investment (FDI), financial market development (FMD) and economic growth focuses mainly on 2 aspects: the relationship between FDI and economic growth, and the role played by FMD in that linkage. The literature is almost silent on the relationship and the direction of causality between FDI and FMD. Although it has been established that FDI contributes more to growth in countries with a more developed financial market, it is not clear how FDI and FMD interact with each other. The aim of this paper is to fill this gap in the African context. Particularly, in Africa, where stock markets experience low liquidity and less transparency, FDI can be an impetus for financial market reforms and serve as a mechanism to improve the transparency and the depth of the financial markets.
This is an output from the ‘Delivering Inclusive Financial Development and Growth’ project
Citation
Otchere, I. , Soumaré, I. and Yourougou, P. (2016), FDI and Financial Market Development in Africa. World Econ, 39: 651-678.