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The purpose of this paper is to explore the effect of globalization and credit market imperfections on child labour.

Analysis is based on cross-country regression framework, incorporating 129 developing countries for the period 1970-2010.

The findings indicate that countries that are more open to trade and having higher foreign direct investment inflow have lower incidence of child labour. As child labour in export-related industries is hard to find, trade sanctions may not have a significant effect on child labour. Further study concludes that income of the bottom quartile of the population is the best representation of the income of the poor when studying child labour.

The study uses the data compiled by International Labour Organization (ILO). Though much of the variation in the data is because of the adjustments made by ILO, this is the only comparable cross-country estimates available. Hence in the absence of the cross-country comparable estimates, many empirical studies have used this data set (e.g. Cigno et al., 2002; Dehejia and Gatti, 2002; Rogers and Swinnerton, 2001). This study acknowledges this limitation but again in the absence of any comparable estimates, the assessment is also based on this data set.

Study contributes in the literature by comparing the effect of export and trade and by exploring the effect of an alternate measure of the income, estimated by using Gini coefficient, on child labour. Further studies exploring the effect of globalization did not explore the presence of imperfect credit market, however, this study has explored the effect of credit market imperfections as well.

This paper makes a novel attempt to estimate the potential impact of credit risk on foreign direct investment (FDI hereafter), thereby focusing on a completely unexplored area in the existing empirical literature.

To provide a comprehensive understanding of the relationship between credit risk and FDI inflows, the study incorporates all the eight-member economies of the South Asian Association of Regional Cooperation (SAARC hereafter) and analyzes a panel data set, over the period 2011 to 2019, extracted from the World Development Indicators, using the suitable econometric techniques for the efficient estimations of the specified models.

The results indicate a negative and statistically significant relationship between the credit risk of the banking sectors and FDI inflows. Similarly, market size and inflation rate appear to be the two other main factors behind the increasing FDI inflows in the SAARC member economies. Interestingly, the size of the market became irrelevant in attracting FDI inflows when the Indian economy is excluded from the sample due to its higher economic weight. On the other hand, FDI inflows are not dependent on the level of trade openness, with most of the specifications showing either an insignificant or negative coefficient of the variable.

The obtained results are unique and robust to alternative methodologies, and hence, the SAARC economies could consider them as the critical inputs in formulating the appropriate policies on FDI inflows.

The findings are unique and original. The authors have established a relationship between credit risk and FDI for the first time in the SAARC context.

In spite of being the second largest recipient of foreign direct investment (FDI) in the world, China shows limited evidence of considerable FDI benefits on growth (Fan and Hu; Luo; Ran et al.). Motivated by Alfaro et al.'s model, the purpose of this study is to test whether poor financial market development might be responsible for the relatively low benefits of FDI on growth in China.

The author applies Blundell‐Bond system GMM estimators to a panel of Chinese provinces.

The results indicate that poor financial intermediation does indeed limit the transmission of FDI benefits within the Chinese economy. Moreover, the study reveals preliminary evidence that banks' credits to unproductive state‐owned enterprises (SOEs) constitute poor financial intermediation with negative growth implications. In contrast, credits to small private enterprises are associated with a positive impact of FDI on growth.

The study is constrained by data availability especially for private credit data across provinces.

Two policy implications can be drawn from the empirical findings. First, the direct policy implication is that to ensure positive benefits from FDI in China, domestic financial reforms are crucial. This is an important perspective for making FDI policies. The results also reveal some key priorities of financial reforms. More credits to small private enterprises are an indication of good financial intermediation, while more loans extended to unproductive SOEs signal poor financial intermediation. The priority of reform comes down to tackling the difficult problem of credit misallocation.

This paper provides an alternative perspective to address the weak FDI‐growth relationship found in China. Inspired by Alfaro et al.'s model and the understanding of the problem of Chinese financial markets, the study examines the role of the financial system in the FDI‐growth linkage and reveals how financial market conditions could influence FDI benefits in China.

The paper investigates the relationship between credit to the economy, foreign direct investment (FDI) and the unemployment rate in Uzbekistan using macroeconomic time series over 2004–2019.

The study estimates the relationship by applying a vector autoregression model, which is considered a “workhorse” model for policy analysis to capture dynamic relationships in economic time series.

The results suggest both growth in credit to the economy and FDI Granger cause a change in the unemployment rate. The authors found 1% increase in bank credits to the economy growth decreases the unemployment rate by 0.096 pp. over eight years. On the contrary, 1% positive shock to FDI growth increases the unemployment rate by 0.0036% in the context of Uzbekistan.

Uzbekistan should improve FDI absorptive capacity, particularly human capital and financial market development, through growth-enhancing structural reforms in the financial sector to stimulate economic growth and employment. The attracted FDI funds should focus on productive and economic sectors with high labor-absorptive capacity, such as financial and professional services, healthcare and biomedicine, creative industries and media, software sector.

The study contributes to the empirical literature on employment effects of FDIs and credit to the economy of Uzbekistan.

This paper explores the relationship between foreign direct investments and financial reporting changes via financial development in 12 Latin American countries during the period from 1997 to 2010.

In order to control the possible endogeneity problem, the Generalized Method of Moments (GMM) estimation technique has been conducted using country-level panel data obtained from the World Development Indicators website.

The empirical analyses provide evidence that international accounting standards have a significant effect on foreign direct investments. However, financial development associated with such standards reduces this positive effect. This is an important finding, suggesting that investors are likely to prefer portfolio to direct investments in Latin American financial markets that require or permit the use of international accounting standards.

The conclusions that have been drawn from this study are important for investors, creditors, and regulators. Although international accounting standards appear to affect foreign investments, there could be a lack of adaptation of these standards to specific economic environments due to cultural, educational, and economic factors. Therefore, firms, regulators, professional organizations, and accounting firms should make necessary arrangements so that the benefits of using these standards increase their costs.

The study contributes to the international accounting literature by examining the effects of international accounting standards and financial development on foreign direct investments in Latin America.

Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms. The survey focuses mainly on work related to developing countries.

The threshold regression framework is used to examine the effect of foreign direct investment on growth in Sub-Saharan Africa (SSA). The growth literature is awash with divergent evidence on the role of foreign direct investment (FDI) on economic growth. Although the FDI–growth nexus has been studied in diverse ways, very few studies have examined the relationship within the framework of threshold analysis. Furthermore, even where this framework has been adopted, none of the previous studies has comprehensively examined the FDI–growth nexus in the broader SSA. In this paper, within the standard panel and threshold regression framework, the problem of determining the growth impact of FDI is revisited.

Six variables are used as thresholds – inflation, initial income, population growth, trade openness, financial market development and human capital, and the analysis is based on a large panel data set that comprises 45 SSA countries for the years 1985–2013.

The results of this study show that the direct impact of FDI on growth is largely ambiguous and inconsistent. However, under the threshold analysis, it is evident that FDI accelerates economic growth when SSA countries have achieved certain threshold levels of inflation, population growth and financial markets development. This evidence is largely invariant qualitatively and is robust to different empirical specifications. FDI enhances growth in SSA when inflation and private sector credit are below their threshold levels while human capital and population growth are above their threshold levels.

The contribution of this paper is twofold. First, the paper streamlines the threshold analysis of FDI–growth nexus to focus on countries in SSA – previous studies on FDI-growth nexus in SSA are country-specific and time series–based (see Tshepo, 2014; Raheem and Oyınlola, 2013 and Bende-Nabende, 2002). This paper provides a panel analysis and considers a broader set of up to 45 SSA countries. Such a broad set of SSA countries had never been considered in the literature. Second, the paper expands on available threshold variables to include two new important macroeconomic variables, population growth and inflation which, though are important absorptive capacities but, until now, had not been used as thresholds in the FDI–growth literature. The rationale for including these variables as thresholds stems from the evidence of an empirical relationship between population growth and economic growth, see Darrat and Al-Yousif (1999), and between inflation and economic growth, see Kremer et al. (2013).

This study examines the role of financial development (FD) in enhancing the growth effect of foreign direct investment (FDI) in emerging and developing Asia from 1996 to 2019.

The study exploits the new broad-based Financial Development Index of the International Monetary Fund (IMF) and adopts panel smooth transition regression (PSTR) to perform alternative empirical models for a multidimensional analysis of the FD threshold effect in the growth–FDI nexus.

The results show two thresholds of FD mediating the nonlinear effect of FDI on growth. FD beyond a certain level will enhance the growth effect of FDI, but very high levels of FD will not induce foreign investment to benefit economic growth in emerging and developing Asian economies. The impact of financial institutions on the FDI–growth link is stronger than that of financial markets. Besides, FDI’s effect on growth has an inverted-U shape conditional on financial depth, whereas it is positively associated with the accessibility and efficiency of the financial system.

These results suggest policy implications for emerging and developing Asian countries, emphasizing the other side of “too much finance” and the potential for improvement in the access to and efficiency of the financial system to boost the effects of FDI and FD in the growth of these economies.

The study is the first multifaceted investigation into the influence of FD on the growth effect of FDI. Beyond the previous empirical evidence showing only the impact of credit from banking sector, this study shows different mediating effects of different financial sectors and three dimensions of financing (depth, access and efficiency). The study suggests essential implications for the region in adjusting long-run policies to enhance the FDI–FD–growth link.

This paper aims to examine the link among foreign direct investment (FDI), domestic credit expansion and economic growth for six Pacific Island countries.

Using panel data over 1982-2011, the authors relate the interaction between domestic credit to private sector and FDI to its impacts on output. This study makes use of panel cointegration and the generalized method of moments estimators.

The empirical results generally show that FDI and domestic credit to private sector serve as substitutes to promote output in these small economies. Such findings are robust to a number of sensitivity tests.

This study contributes to the literature by examining the interaction between domestic credit to private sector and FDI and its impact on output in small Pacific Island economies.

This paper empirically examines the perceived relationship between banking sector performance and FDI inflows, thereby highlighting an underexplored area in the existing literature.

To provide evidence from the South Asian context, this study selected five economies of the same region based on the data availability. A panel dataset, collected from the internationally reliable sources for the period 1998–2017, is analyzed with the help of different econometric techniques, including pooled least squares, fixed effects, generalized least square and two stages least squares.

The results indicate a significant negative relationship between banking sector performance and FDI inflows while demonstrating a significant positive association of inflation and trade openness with FDI inflows Moreover, higher per capita income, which is one of the indicators of a growing economy, exerts a statistically significant positive impact on FDI inflows. Finally, institutional factors have not played a significant role in attracting FDI in the sampled countries.

The results demonstrate a unique outcome from the perspective of the relationship between banking sector performance and FDI inflows, and hence policymakers of the developing countries in general and South Asian countries in particular would benefit from the current study significantly.

The obtained results are original as we have provided comprehensive evidence on the relationship between FDI and banking sector performance in the SAARC context for the first time.