Title: An empirical investigation into the banking intermediation and Foreign Direct Investment inflows in China

Authors: Jean-Claude Maswana

Addresses: Graduate School of Economics, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606 8501, Japan

Abstract: The Toda–Yamamoto version of the Granger causality test was employed to investigate the FDI-banking sector interactions in China. Empirical findings show that banking development help attract FDI inflows rather than the reverse. Interestingly, FDI was found to influence the whole structure of interest rates and vice versa, which implies that FDI inflows may well represent entrenched institutional constraints; suggesting that effective policies for dealing with economic overheating and efficiency of banking intermediation should encompass a combination of changing FDI volume and the cost of banking intermediation.

Keywords: banking intermediation; banks; development economics; China; foreign direct investment; Granger causality test; Toda Yamamoto test; FDI inflows; bank interactions; interest rates; institutional constraints; economic overheating; business; economies; emerging markets.

DOI: 10.1504/IJBEM.2010.031691

International Journal of Business and Emerging Markets, 2010 Vol.2 No.2, pp.193 - 209

Available online: 18 Feb 2010

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