Foreign Direct Investment Absorption Capacity

We characterize the long-run foreign direct investment (FDI) absorption capacity by both direct and indirect methods on one cross-section data sample covering 180 economies from 1980 to 2013. The capacity is built up on productivity growth rate, savings–investment gap by the first approach and on financial development level by the second one. Two methods together reveal that deeper international financial integration by a higher capital account openness can expand substantially the foreign capital absorption capacity.