Financial Development and FDI in Greece and Neighbouring Countries: A Panel Data Analysis

This paper aims to examine the association between financial development and foreign direct investment (FDI) in Greece and neighbouring countries (Bulgaria, Macedonia and Turkey) for the period 1996-2012. Bootstrap causality analyses are used to examine this causal linkage for these countries which are either European Union (EU) members or candidates for EU accession. The empirical results indicate that FDI has a predictive power to forecast financial development in all of the countries except for Macedonia. In addition, findings indicate that there is bidirectional causality in Turkey.