Does Financial Reform Promote the Inflow of FDI? Evidence from China's Panel Data

This paper empirically tests whether the host country financial reform promotes the inflow of FDI. We test the hypothesis on the panel data of China. First, Granger causality tests (Granger, 1969; Sims, 1972) show that financial deregulation causes FDI and the causality is unidirectional. Second, OLS regressions show that financial deregulation has an insignificant effect (at the 10% level) on inward FDI, after controlling for other factors, and time and province effects.