Liberalizing Financial Services and Foreign Direct Investment: Developing a Framework for Commercial Banking FDI

276 Pages·2011·1.706 MB·English

by  Laura Páez (auth.)

Liberalizing Financial Services and Foreign
Direct Investment

Liberalizing Financial
Services and Foreign
Direct Investment
Developing a Framework for
Commercial Banking FDI
Laura Páez
United Nations Economic Commission for Africa
Palgrave
macmillan
© Laura Páez 2011
Softcover reprint of the hardcover 1st edition 2011 978-0-230-27157-9
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First published 2011 by
PALGRAVE MACMILLAN
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ISBN 978-1-349-32263-3 ISBN 978-0-230-31682-9 (eBook)
DOI 10.1057/9780230316829
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10 9 8 7 6 5 4 3 2 1
20 19 18 17 16 15 14 13 12 11
To my mom Silvia, an ever-inspiring source of faith,
optimism, and perseverance

Contents
List of Illustrations ix
Preface xi
About the Author xii
Introduction 1
1 Understanding Foreign Direct Investment 7
1.1 Foreign direct investment (FDI) and other
financial flows 8
1.2 Theoretical foundations of FDI 12
1.3 Static and dynamic effects of FDI 28
1.4 Open research questions in FDI literature 33
Summary 35
2 Applying FDI Theory to Commercial Banking 37
2.1 Commercial banking and other financial services 38
2.2 Determinants of FDI in commercial banking 43
2.3 FDI typologies in commercial banking 50
2.4 S tatic and dynamic effects of commercial
banking FDI 56
Summary 72
3 Multilateral Rules on Financial Services and FDI 74
3.1 International financial sector regulation 75
3.2 Previous international regulation liberalizing
financial services and FDI 79
3.3 The World Trade Organization: rules governing
financial services 85
3.4 F inancial services liberalization from a
public goods perspective 114
Summary 117
4 GATS Financial Services Liberalization in
OECD Members 119
4.1 Overview of the GATS schedules of commitments 120
vii
viii Contents
4.2 T ypes of MFN exemptions affecting commercial
banking FDI 134
Summary and preliminary conclusions 138
5 Assessing FDI Determinants in Commercial Banking 139
5.1 Empirical evidence on FDI 139
5.2 Financial sector FDI in OECD countries: measures,
trends, and determinants 150
5.3 Assessing the impact of GATS liberalization on
commercial banking FDI 163
Summary and preliminary conclusions 169
6 Conclusions 171
6.1 Legal effects of GATS FS liberalization for
commercial banking 172
6.2 Empirical evidence on FDI in commercial
banking in the OECD region 173
6.3 Policy recommendations for attracting greater
financial sector FDI 174
Annexes 176
Notes 216
Bibliography 242
Index 255
Illustrations
Tables
3.1 E xamples of goods according to their
excludability and rivalry 77
4.1 O verview of commitments concerning financial
services FDI in OECD countries 121
4.2 M easures inscribed in the horizontal commitments
affecting commercial banking FDI 124
4.3 M easures inscribed in the sectoral commitments
affecting commercial banking FDI 130
4.4 T ype of MFN exemptions affecting commercial
banking FDI 136
A.1 Summary statistics of the OECD dataset 190
A.2 Summary statistics of the BEA dataset 191
A.3 Correlations of the OECD dataset 192
A.4 Correlations of the BEA dataset 194
A.5 Specification results for the OECD dataset 196
A.6 Specification results for the BEA dataset 202
A.7 Netting results for the OECD and BEA datasets 207
A.8 Column (1) FE and OLS estimations for the
OECD dataset 208
A.9 Column (2) FE and OLS estimations 210
A.10 Column (1) FE and OLS estimations for the
BEA dataset 212
A.11 Column (2) FE and OLS estimations 214
Figures
1.1 Diagrammatic representation of FDI by an enterprise 10
2.1 Characterizing financial intermediation 39
5.1 Total global and OECD FDI flows in US$ millions
and % share (1985–2009) 151
5.2 Percentage share of sectoral FDI in the
OECD (1985–2009) 152
ix