The Impact of Financial Complexity on the Host’s FDI Inflow in Selected Asian Countries

Poorabdollah, Fatemah; Makiyan, Seyed-nezamuddin

doi:10.48308/jep.2025.238516.1210

The Impact of Financial Complexity on the Host’s FDI Inflow in Selected Asian Countries

Document Type : Original Article

Authors

Economics Dept., Yazd University, Yazd, Iran

10.48308/jep.2025.238516.1210

Abstract

Foreign investment can be considered as a leverage to help countries in achieving higher growth and development. Foreign investment inflow into a country can be used as a key factor for development. In order to increase foreign investment, its determinants factors should be clarified and a right policy decision should be taken. This paper aims to examine the impact of financial complexity as an effective factor on the host’s FDI inflow in 15 Asian countries for 2010 to 2021. At first, we determined the amount of financial complexity for investigated countries. For this, we developed a novel method to calculate the financial complexity by McCabe's number. For explain the relationship between FDI factors and host country’s FDI inflow, we estimate a model and consider FDI as dependent variable and financial complexity, and also exchange rate, GDP growth, interest rate and trade openness as independent variables, to examine the relationship between them. Results indicate that FDI is positively sensitive to host country financial complexity, indicating the higher financial complexity lead to higher FDI inflow.

Keywords

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