Foreign investment and economic growth

It’s not only the company which receives foreign investment that benefits. Sebnem Kalemli-Özcan’s recent research reveals that FDI is beneficial for the aggregate growth of the domestic economy as well — as long as the country has strong institutions and well-developed financial markets. “If you’re an investor, you want to make sure you are in an environment where you can function. This is very important in the sense that countries that want to attract FDI should really think about strengthening their institutional environment. If you look at the worldwide allocation of FDI among emerging markets right now, it will be in markets that have done a lot of structural reforms.”

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Topics:  Development International finance

Tags:  FDI, foreign investment, growth

Neil Moskowitz Endowed Professor of Economics, University of Maryland; Research Fellow, CEPR

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