International financial competitiveness and incentives to foreign direct investment

In: Discussion paper

In: Series 1, Studies of the Economic Research Centre No 29/2008

Abstract

In this paper an index of financial competitiveness is calculated that corresponds to the market-to-book ratio of inward FDI stocks. For a panel of five advanced economies from 1980 to 2006 it is shown that price competitiveness, stable inflation rates and registered patents have a positive impact on the index. Institutional factors like EMU membership or Anglo-Saxon legislation also play a role. Financial competitiveness in turn encourages FDI inflows whereas it benefits fixed investment relative to M&A. There is also some evidence inflows whereas it benefits fixed investment relative to M&A. There is also some evidence among investors. -- competitiveness ; foreign direct investment ; international integration