The Impact of Foreign Direct Investment in Dealing with Financial Development on Economic Growth (Case Study of Islamic Countries)

Many economists insist that the financial market is a key factor in economic growth due to the role of financial markets in financing and capital formation in different countries. With the development of endogenous growth models in recent decades, researchers pay more attention to the relation between financial markets and economic growth. In this study, the empirical relationship between Foreign Direct Investment in dealing with financial development on economic growth investigated in 25 Islamic countries over the period 1990 to 2012 using Generalized Method of Moments (GMM). The results show that the interaction between foreign direct investment and market-based indicators of financial development causes economic growth.