Financial-Sector Foreign Direct Investment and Host Countries: New and Old Lessons

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Financial-Sector Foreign Direct Investment and Host Countries: New and Old Lessons

April 2004 Number 183

JEL classification: F3, F4

Author: Linda Goldberg

Many of the lessons from foreign direct investment (FDI) research on manufacturing and extractive resource industries are applicable to FDI research on the financial sector. This paper summarizes the main findings and policy themes of FDI research, with a primary focus on the implications of FDI for host countries, especially emerging market economies. I review evidence of technology transfers, productivity spillovers, wage effects, macroeconomic growth, and fiscal and tax concerns. Throughout this paper, I stress that parallel findings often arise from studies of general FDI and studies of financial-sector FDI. I also emphasize important differences between the effects of FDI in these sectors, especially with regard to local institution building and business cycles. These differences—more so than the similarities—should be the focus of research efforts.

Available only in PDF PDF

27 pages / 261 kb

For a published version of this report, see Linda S. Goldberg, "Financial Sector FDI and Host Countries: New and Old Lessons," Federal Reserve Bank of New York Economic Policy Review 13, no. 1 (March 2007): 1-17.

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17 pages / 198 kb

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