【Abstract】

The source of financial development is less investigated in the literature, especially the role foreign direct investment (FDI) plays on financial development. Using data from 50 countries joining the Belt and Road Initiative, this article at first time tests the impact of FDI on financial development in a host country. Empirical results show that FDI can significantly improve the development of financial sector, especially the development of financial markets. FDI is found to be a stronger driver of financial development for countries with higher quality institutions. Moreover, FDI not only increases financial deepening, but also enhances financial function.

【Keywords】

Financial development, FDI, Institutional quality, The Belt and Road

【Authors】

Abuduwali Aibai, School of Finance, Xinjiang University of Finance and Economics. 

Huang Xianjing, Business School and China-ASEAN Research Institute, Guangxi University. 

Luo Yu, Research Fellow of IMI, School of Finance, China Financial Policy Research Center, and International Monetary Institute, Renmin University of China. 

Peng Yuchao, Research Fellow of IMI, School of Finance and Belt & Road Finance Institute, Central University of Finance and Economics.