| This dissertation studies international investment in two contexts. In the first two chapters, I look at the impact of stock market liberalization in emerging markets. In the third chapter, I study the determinants of foreign direct investment in Europe. The first chapter studies the relation between equity market liberalization and imports of capital goods, we examine one channel through which international financial integration can promote growth. For the period 1980-1997, we find that after controlling for other policies and fundamentals, stock market liberalizations are associated with a significant increase in the share of imports of machinery and equipment. We hypothesize this can be attributed to the consequences of financial integration, which allows access to foreign capital, and provide evidence consistent with this channel. Our results suggest that increased access to international capital allows countries to enjoy the benefits embodied in capital goods. In the second chapter, I examine the effects of financial integration on investment and the allocation of resources, exploring the effects of stock market liberalization on financing constraints. I ask whether those industries that are most dependent on finance from external sources grow faster after stock market liberalization. I find that after stock market liberalization, industries that are more dependent on external finance grow faster in countries with a stock market capitalization to GDP ratio of greater than 10%. These results are robust to controlling for other types of capital flows, broad capital account liberalization, domestic financial liberalization, and shocks to growth opportunities. Finally, in the third chapter, I explore the industry and country level determinants of foreign direct investment (FDI) in Europe. In particular, I analyze the tradeoff firms make between proximity to customers and concentration of production and as well as comparative advantage motives for FDI. Studying FDI using a broad range of parent and host countries, this paper confirms many previous findings in the literature that have relied chiefly on bilateral data. I also present new results that support predictions of general equilibrium models of the proximity-concentration hypothesis. |
