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2002 | nr 20 Foreign Banks and Economic Transition: Papers in Progress | 51--68
Tytuł artykułu

Does Foreign Bank Entry Really Stimulate Gross Domestic Investment?

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Języki publikacji
The main question that motivates this paper is: does foreign bank entry really stimulate gross domestic investment in the host economies? Specifically, the paper investigates the linear as well as non-linear properties of the relationship between the entry of foreign banks and changes in aggregate investment. A standard model of aggregate investment behaviour, in which an indicator for foreign banks is one of the determinants, is estimated and tested on a cross-section of data from 55 countries. The regression results strongly suggest that the relationship between foreign bank entry and aggregate investment mimic a U-curve: low (high) values of foreign bank entry have negative (positive) effects on domestic investment. The threshold value for the U- curve is also identified; this value represents the critical point at which foreign bank entry starts to stimulate aggregate investment. Hence, it is not until it has gained substantial proportions that foreign bank entry stimulates gross domestic investment in the host economies. (original abstract)
Słowa kluczowe
  • University of Groningen, Netherlands
  • Birmingham Business School, United Kingdom
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