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.