Impact of International Trade and Foreign Capital Investments on Financial Development: Evidence from Next-11 Countries


Doğan M., Kevser M., Sümerli Sarıgül S.

3 rd International CEO Communication, Economics, Organization & Social Sciences Congress, Dnipropetrovsk, Ukraine, 24 - 25 December 2021, pp.471-478

  • Publication Type: Conference Paper / Full Text
  • City: Dnipropetrovsk
  • Country: Ukraine
  • Page Numbers: pp.471-478

Abstract

Many countries encourage multinational companies to invest directly in their own countries in order to ensure economic growth and development. Foreign capital investments are critical to growth and development due to the accumulation of capital, creating new business opportunities and increasing total factor efficiency. In addition, international trade is an influential factor in economic development. According to UNCTAD (2014), international trade information transfer has an impact on economic growth by increasing technology expansion and competition. Financial development is also considered as one of the driving factors of economic growth. In this context, there are important relations between international trade, foreign capital investments and financial development. For example, if you want to use Yeboua (2019) states that foreign direct investments increase if a certain level of financial development is captured, thus improving international trade. Abidin et al. (2015) investigated the coordination relations between foreign direct investments, financial development and trade in ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand). Granger causality test results showed a one-way relationship between trade and financial development and trade and foreign capital investments in the short term. In this study, the impact of international trade and foreign capital investments on financial development in Next11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam) countries was examined. Cd-LM horizontal section tests, Pesaran panel unit root test, Westerlund coordination test and Dumitrescu-Hurlin panel causality test were used on the annual panel data for 1990-2019. The results of the research show long-term co-ordination between the variables. Keywords: Financial Development, Foreign Capital İnvestments, İnternational Trade.