FOREIGN DIRECT INVESTMENT, EXCHANGE RATE AND FINANCE-GROWTH NEXUS

Present study revisits the financial market development and economic growth nexus by examining the path through which exchange rate determines the role of foreign direct investment on finance-growth link. Sample data represents 22 Asian countries for the period of 1998–2018. Following the categorization of World Bank, study divides the data in developing and developed countries. Findings depict that the developing countries can achieve maximum growth in times of fewer foreign direct investments and weaker home currency. While, developed countries can maximize their economic progression by increasing foreign direct inflows and appreciated home country’s currency. Policy makers of developing countries should develop guidelines that encourage their local industry to foster economic growth and make necessary steps to stabilize their currency. In comparison to this, regulators of developed countries should relax trade tariffs and quotas to increase foreign direct investments and economic growth. Keywords: Financial Market Development, Economic Growth, Exchange Rate, Foreign Direct Investment, Asian countries.