Financial development, foreign direct investment and economic growth: panel causality approach

Nevena Veselinović; Danijela Despotović

doi:10.5937/industrija49-35397

Nevena Veselinović Megatrend University, Faculty of Management Zaječar
Danijela Despotović University of Kragujevac, Faculty of Economics, Kragujevac

DOI: https://doi.org/10.5937/industrija49-35397

Keywords: banking sector depth, economic growth, foreign direct investment, panel analysis

Abstract

The examination considers the causality between banking sector depth, foreign direct investment, and economic growth in the sample of six Central and Eastern European countries in the period range between 2000 to 20118. Utilizing the Dumitrescu and Hurlin (2012) panel causality test, the results confirmed a supply-leading hypothesis, FDI-led growth hypothesis, and unidirectional causality from the banking sector depth to foreign direct investment. As the causality ranging from the depth of the banking sector to foreign direct investment and economic growth has been confirmed, the conclusion is that attention should be focused on policies that promote the development of the banking sector. In this way, a well-regulated banking sector will attract more FDI, which will lead to higher growth rates in the analyzed countries.

Author Biography

Danijela Despotović, University of Kragujevac, Faculty of Economics, Kragujevac

Danijela Despotović is a full professor at the Faculty of Economics, University of Kragujevac. She teaches Theory and Analysis of Economic Policy at the undergraduate level. At the graduate level, she teaches Economic Policy and Sustainable Development as well as Financing of Economic Development. Within the Doctoral Academic Studies, her engagement is related to the subject Economic Policy in Crisis Conditions. She is the author or co-author of over 150 scientific papers published in international and leading national journals. She is a member of several professional organizations such as the European Association of Environmental and Resource Economists (EAERE). She is a member of the Scientific Society of Economists of Serbia and a member of the Presidency and the Executive Board of the Society of Economists of Kragujevac. She acted as a member of scientific committees of International Conferences. She is a reviewer of several domestic and leading international scientific journals (SCI list), and a member of the editorial board of several domestic journals.

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