Abstract
Based on a comprehensive review of previous studies about the threshold effects of financial development on the process of foreign direct investment (FDI) spillovers, the present work roundly measures the financial development from the aspects of scale, structure, and efficiency and applies a multiple threshold regression model to estimate the threshold effects of financial development on FDI spillovers, and then examines the inherent relationship between FDI spillovers effects and the financial development from the three aspects, respectively, in different regions of China, based on regional panel data from 2000 to 2014. The results revealed that there are two thresholds of financial development scale, structure and efficiency, existing in the FDI spillover processes in different regions. The FDI spillovers effects are greatest in the eastern region and are generally smallest in the western region. There is a negative correlation between FDI spillovers effects and the financial development scale or efficiency in eastern and central region. Moreover, there is positive correlation between FDI spillovers effects and the financial development structure in eastern and central region. Additionally, there is a positive correlation between FDI spillovers effects and the financial development scale, structure, or efficiency in western region. The capital, labor, and regional technology progress have positive effects on economic growth in different regions and the effects of financial development on economic growth are not unanimous in each region. Based on the empirical results, some policies on how to develop regional finances and how to introduce FDI to promote economic growth are recommended.
Highlights
Since 2000, a large amount of foreign direct investment (FDI) has flowed into China
We have strong evidence to conclude that the financial development scale has a double-threshold effect on FDI spillover processes in the eastern region
After confirming the existence of the two threshold values, the scale, structure, and efficiency of financial development is divided into three ranges, respectively, and the corresponding threshold effects on FDI spillovers are estimated in different regions
Summary
Since 2000, a large amount of foreign direct investment (FDI) has flowed into China. According to the World Investment Report 2015, released by the United Nations Trade Development Organization, there were approximate 129 billion dollars of FDI flowing into China in 2014 [1]. Thereafter, the innovation degree, human capital, trade openness, infrastructure, technology gap, and financial development are regarded as the representative variables of absorptive capacity in order to examine the corresponding threshold effects on the FDI spillovers process [16,17,18,19,20]. The threshold effect of financial development is whether or not the process of FDI spillovers affecting different regions of China. What is the inherent relationship between the FDI spillovers effects and the financial development in different regions of China? Selecting appropriate indicators to measure the financial development and calculate the threshold effects of financial development on FDI spillovers, and finding the inherent relationship between FDI spillovers effects and the financial development in different regions of China has a certain theoretical and practical significance If there are threshold effects of financial development on FDI spillovers, how much are the threshold values? What is the inherent relationship between the FDI spillovers effects and the financial development in different regions of China? selecting appropriate indicators to measure the financial development and calculate the threshold effects of financial development on FDI spillovers, and finding the inherent relationship between FDI spillovers effects and the financial development in different regions of China has a certain theoretical and practical significance
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