Impact of national institutional quality on the FDI economic sector in emerging economies - The moderating role of financial development


Authors

  • Do Thi Minh Hue VNU University of Economics and Business
DOI: https://doi.org/10.57110/vnu-jeb.v5i1.458

Keywords:

Foreign direct investment capital, institutional quality, Financial development, Emerging economies

Abstract

This study focuses on assessing the impact of the national institutional quality on developing the foreign direct invested economic sector (FDI) in emerging economies, while controling the moderating role of financial development. Using balanced panel data of 14 emerging economies in the 2002-2021 period, the study analyzes the individual and interactive effects of the aggregate variable of institutional quality as well as its components, such as control of corruption, government effectiveness, political stability, rule of law, and regulatory quality, on the cumulative value of FDI flows that a country receives through financial development. The results indicate that, while improvements in institutional quality and financial development positively impact FDI, the interaction between these two factors can create the opposite effect, potentially increasing regulatory complexity and reducing the attractiveness of the investment environment. The study provides important policy insights, suggesting that emerging economies should carefully consider institutional reform and financial development to optimize FDI inflows and promote sustainable economic growth.

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25-02-2025

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Do Thi Minh Hue. (2025). Impact of national institutional quality on the FDI economic sector in emerging economies - The moderating role of financial development. VNU JOURNAL OF ECONOMICS AND BUSINESS, 5(1), 25. https://doi.org/10.57110/vnu-jeb.v5i1.458

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