Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold
The study investigates the nonlinear relationship between financial development and economic growth, with a particular focus on the mediating role of FDI in low- and middle-income countries. Using annual panel data covering 81 countries from 1990 to 2019, the study applies a dynamic panel threshold...
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| Format: | Article |
| Language: | English |
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Ital Publication
2025-03-01
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| Series: | Journal of Human, Earth, and Future |
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| Online Access: | https://hefjournal.org/index.php/HEF/article/view/498 |
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| author | Abdalla Sirag Hamisu S. Ali Zakaria Lacheheb Osman S. Ahmed Emad E. Omer |
| author_facet | Abdalla Sirag Hamisu S. Ali Zakaria Lacheheb Osman S. Ahmed Emad E. Omer |
| author_sort | Abdalla Sirag |
| collection | DOAJ |
| description | The study investigates the nonlinear relationship between financial development and economic growth, with a particular focus on the mediating role of FDI in low- and middle-income countries. Using annual panel data covering 81 countries from 1990 to 2019, the study applies a dynamic panel threshold regression model to identify the level of financial development at which its impact on economic growth changes. The analysis incorporates FDI as an additional conditioning variable to examine how its interaction with financial development influences the threshold dynamic. A significant threshold effect: below a certain level of financial development, the impact of FDI on growth is statistically insignificant, while above the threshold, FDI exerts a strong positive influence on economic growth. The findings imply that the growth-enhancing effect of financial development is not automatic and depends on reaching a critical level of financial maturity, as well as an enabling environment that leverages FDI inflows. The study contributes to the literature by offering empirical evidence of a nonlinear, FDI-conditioned finance-growth nexus, and it provides policy guidance for developing economies aiming to optimize the benefits of financial sector reforms.
Doi: 10.28991/HEF-2025-06-01-013
Full Text: PDF |
| format | Article |
| id | doaj-art-6e4551c9fd9245a594a0362caf0ca3ff |
| institution | Kabale University |
| issn | 2785-2997 |
| language | English |
| publishDate | 2025-03-01 |
| publisher | Ital Publication |
| record_format | Article |
| series | Journal of Human, Earth, and Future |
| spelling | doaj-art-6e4551c9fd9245a594a0362caf0ca3ff2025-08-20T03:53:13ZengItal PublicationJournal of Human, Earth, and Future2785-29972025-03-016120321810.28991/HEF-2025-06-01-013188Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel ThresholdAbdalla Sirag0Hamisu S. Ali1Zakaria Lacheheb2Osman S. Ahmed3Emad E. Omer4College of Economics and Management, Al Qasimia University, Sharjah,Department of Economics, Faculty of Social and Management Science, Adamawa State University, Mubi,Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia, Gombak,College of Arts, Sciences and Information Technology, University of Khorfakkan, Sharjah,College of Mass Communication, Ajman University,The study investigates the nonlinear relationship between financial development and economic growth, with a particular focus on the mediating role of FDI in low- and middle-income countries. Using annual panel data covering 81 countries from 1990 to 2019, the study applies a dynamic panel threshold regression model to identify the level of financial development at which its impact on economic growth changes. The analysis incorporates FDI as an additional conditioning variable to examine how its interaction with financial development influences the threshold dynamic. A significant threshold effect: below a certain level of financial development, the impact of FDI on growth is statistically insignificant, while above the threshold, FDI exerts a strong positive influence on economic growth. The findings imply that the growth-enhancing effect of financial development is not automatic and depends on reaching a critical level of financial maturity, as well as an enabling environment that leverages FDI inflows. The study contributes to the literature by offering empirical evidence of a nonlinear, FDI-conditioned finance-growth nexus, and it provides policy guidance for developing economies aiming to optimize the benefits of financial sector reforms. Doi: 10.28991/HEF-2025-06-01-013 Full Text: PDFhttps://hefjournal.org/index.php/HEF/article/view/498financial developmentfdieconomic growthdynamic panel thresholdlow- and middle-income countries. |
| spellingShingle | Abdalla Sirag Hamisu S. Ali Zakaria Lacheheb Osman S. Ahmed Emad E. Omer Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold Journal of Human, Earth, and Future financial development fdi economic growth dynamic panel threshold low- and middle-income countries. |
| title | Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold |
| title_full | Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold |
| title_fullStr | Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold |
| title_full_unstemmed | Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold |
| title_short | Financial Development, FDI, and Economic Growth in Low- and Middle-Income Countries: A Dynamic Panel Threshold |
| title_sort | financial development fdi and economic growth in low and middle income countries a dynamic panel threshold |
| topic | financial development fdi economic growth dynamic panel threshold low- and middle-income countries. |
| url | https://hefjournal.org/index.php/HEF/article/view/498 |
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