Financial Integration, Technology Transfer, Labor Productivity Growth and Economic Growth on Pre-and-During COVID-19 Crisis: Evidence from G20 Countries

Luki Okta Fahri, Nur Imamah, Ari Darmawan


This study investigates the role of financial integration, technology transfer, and labor productivity growth in economic growth pre-and-during the COVID-19 pandemic crisis. The data collected is panel data from 20 countries of the G20 in the period 2018Q4–2021Q1. By using fixed-effects regression, the results showed that foreign direct investment had a significant effect on economic growth during the COVID-19 crisis, while foreign portfolio investment did not. Furthermore, labor productivity growth has been proven to play a role in moderating foreign portfolio investment, foreign direct investment, and technology transfer in pre-crisis economic growth. However, entering into the COVID-19 crisis stage, labor productivity growth is no longer proven to be moderating, due to a major lockdown policy that led to a decline in labor productivity. This study contributes to helping policymakers with various considerations and sets realistic expectations about the role of financial integration and technology transfer in the recovery of economic growth due to the global crisis.


economic growth; financial integration; global financial crisis; labor productivity growth; technology transfer

Full Text:



Acemoglu, D., Aghion, P., & Zilibotti, F. (2006). Distance to frontier, selection, and economic growth. Journal of the European Economic Association, 4(1), 37–74.

Acemoglu, D., & Zilibotti, F. (2015). Was Prometheus Unbound by Chance? Risk, Diversification, and Growth. Journal of Political Economy, 105(4), 709–751.

Adler, G., & Garcia-Macia, D. (2018). The Stabilizing Role of Net Foreign Asset Returns. International Monetary Fund.

Agbloyor, E. K., Abor, J. Y., Adjasi, C. K. D., & Yawson, A. (2014). Private capital flows and economic growth in Africa: The role of domestic financial markets. Journal of International Financial Markets, Institutions and Money, 30(1), 137–152.

Agénor, P.-R. (2004). Does globalization hurt the poor? International Economics and Economic Policy, 1(1), 21–51.

Aghion, P., Blundell, R., Griffith, R., Howitt, P., & Prantl, S. (2009). The effects of entry on incumbent innovation and productivity. Review Economic Statistic, 91(1), 20–32.

Aguiar, M., & Gopinath, G. (2005). Fire-Sale Foreign Direct Investment and Liquidity Crises. The Review of Economics and Statistics, 87(3), 439–452.

Al-Abri, A., & Baghestani, H. (2015). Foreign investment and real exchange rate volatility in emerging Asian countries. Journal of Asian Economics, 37, 34–47.

Asamoah, M. E., & Alagidede, I. P. (2020). Exploring the causal relationships and allocation puzzle between portfolio investments and real sector growth in Sub-Saharan Africa. Research in International Business and Finance, 52, 101187.

Azenui, N. B., & Rada, C. (2021). Labor productivity growth in sub-Sahara African LDCs: sectoral contributions and macroeconomic factors. Structural Change and Economic Dynamics, 56, 10–26.

Azman-Saini, W. N. W., Baharumshah, A. Z., & Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling, 27(5), 1079–1089.

Babecky J, Komarek L, & Komarkova z. (2013). Financial integration at times of financial (in) stability. Czech Journal Economic Finance, 63(1), 25–45.

Baele, L., Ferrando, A., Hördahl, P., Krylova, E., & Monnet, C. (2004). Measuring European Financial Integration. Oxford Review of Economic Policy, 20(4), 509–530.

Bende-Nabende, A., Ford, J. L., Santoso, B., & Sen, S. (2010). The interaction between FDI, output and the spillover variables: co-integration and VAR analyses for APEC, 1965-1999. Applied Economics Letters, 10(3), 165–172.

Benzaim, S., Ftiti, Z., Khedhaouria, A., & Djermane, R. (2021). US foreign investments: Technology transfer, relative backwardness, and the productivity growth of host countries. Quarterly Review of Economics and Finance.

Bergant, K. (2021). The role of stock-flow adjustment during the global financial crisis. Journal of International Money and Finance, 110, 102261.

Billio, M., Getmansky, M., Lo, A. W., & Pelizzon, L. (2012). Econometric measures of connectedness and systemic risk in the finance and insurance sectors. Journal of Financial Economics, 104(3), 535–559.

Blonigen, B. A., Fontagné, L., Sly, N., & Toubal, F. (2014). Cherries for sale: The incidence and timing of cross-border M&A. Journal of International Economics, 94(2), 341–357.

Borensein, E., de Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth? Journal International Economy, 45(1), 115–135.

Chai, H. Y., & Rhee, Y. (2005, June). Financial integration and financial efficiency in East Asia. Paper Presented at the Claremont-KIEP International Conference.

Chari, A., & Blair Henry, P. (2008). Firm-specific information and the efficiency of investment. Journal of Financial Economics, 87(3), 636–655.

Chee-Keong Choong, Ahmad Zubaidi Baharumshah, Zulkornain Yusop, & Muzafar Shah Habibullah. (2010). Private capital flows, stock market and economic growth in developed and developing countries: A comparative analysis. Japan and the World Economy, 22, 107–117.

Choe, J. il. (2003). Do Foreign Direct Investment and Gross Domestic Investment Promote Economic Growth? Review of Development Economics, 7(1), 44–57.

Choong, C. K., Baharumshah, A. Z., Yusop, Z., & Habibullah, M. S. (2010). Private capital flows, stock market and economic growth in developed and developing countries: A comparative analysis. Japan and the World Economy, 22(2), 107–117.

Comes, C. A., Bunduchi, E., Vasile, V., & Stefan, D. (2018). The impact of Foreign Direct Investments and remittances on Economic Growth: A case study in Central and Eastern Europe. Sustainability, 10(1), 238.

Crafts, N. (2017). Brexit and state aid. Oxford Review of Economic Policy, 33(1), 105–112.

Danquah, M., Moral-Benito, E., & Ouattara, B. (2014). TFP growth and its determinants: a model averaging approach. Empirical Economic, 47(1), 227–251.

Duasa, J., & Kassim, S. H. (2009). Foreign Portfolio Investment and Economic Growth in Malaysia. Review, 48(2), 109–123.

Durham, J. B. (2004). Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth. European Economic Review, 48(2), 285–306.

Easterly, W., & Levine, R. (2001). What have we learned from a decade of empirical research on growth? It’s Not Factor Accumulation: stylized Facts and Growth Models. World Bank Economic Review, 15(2), 177–219.

Eslamloueyan, K., & Fatemifar, N. (2021). Does deeper financial integration lead to macroeconomic and financial instability in Asia? Economic Analysis and Policy, 70, 437–451.

European Union. (2021). Digitalisation & Beyond: The COVID-19 Pandemic & Productivity Growth in G20 Countries.

Fagerberg, J. (1994). Technology and international differences in growth rates. Journal Economy Literature, 32, 1147–1175.

Ferragina, A. M., & Mazzotta, F. (2014). FDI spillovers on firm survival in Italy: Absorptive capacity matters! The Journal of Technology Transfer, 39, 859–897.

Ferreira, J. J. M., Fernandes, C. I., & Ferreira, F. A. F. (2020). Technology transfer, climate change mitigation, and environmental patent impact on sustainability and economic growth: A comparison of European countries. Technological Forecasting and Social Change, 150, 119770.

Fons-Rosen, C., Kalemli-Ozcan, S., Sørensen, B. E., Villegas-Sanchez, C., & Volosovych, V. (2021). Quantifying productivity gains from foreign investment. Journal of International Economics, 131, 103456.

Fung, L., Tam, C.-S., & Yu, I. (2008). Assessing the Integration of Asia’s Equity and Bond Markets. BIS Paper, 42.

Furman, J. L., & Hayes, R. (2004). Catching up or standing still? National innovative productivity among “follower” countries. Research Policy, 33, 1329–1354.

G20. (2021, December). G20 Member Countries. Https://G20-Indonesia.Id/. .

Giannetti, M., & Ongena, S. (2009). Financial Integration and Firm Performance: Evidence from Foreign Bank Entry in Emerging Markets. Review of Finance, 13(2), 181–223.

Goldthau A. (2017). The G20 must govern the shift to low-carbon energy. Nature, 564, 203–205.

Guadalupe, M., Kuzmina, O., & Thomas, C. (2012). Innovation and foreign ownership. American Economic Review, 102(7), 3594–3627.

Gui-Diby, S. L. (2014). Impact of foreign direct investments on economic growth in Africa: Evidence from three decades of panel data analyses. Research in Economics, 68(3), 248–256.

Guiso, L., Jappelli, T., Padula, M., & Pagano, M. (2004). Financial Market Integration and Economic Growth in The EU. Economic Policy, 19(40), 524–577.

Hill, H., & Jongwanich, J. (2009). Outward Foreign Direct Investment and the Financial Crisis in Developing East Asia. Asian Development Review, 26(2), 1.

Hoogduin, L., Öztürk, B., & Wierts, P. (2011). Public debt managers’ behaviour interactions with macro policies. Revue Economique, 62(6), 1105–1122.

Huang, W. (2014). Review on the cooperation of the BRICS countries: basis,Impetus,and development (in Chinese). International Economic Trade Reseach, 30, 46–59.

Hull, L., & Tesar, L. (2001). The structure of international capital flows. In The World’s New Financial Landscape: Challenges for Economic Policy, ed. Kiel Institute of World Economics Symposia and Conference Proceedings, 87–109.

Iamsiraroj, S. (2016). The foreign direct investment-economic growth nexus. International Review of Economics and Finance, 42, 116–133.

Ilmakunnas, P., & Piekkola, H. (2014). Intangible investment in people and productivity. Journal of Productivity Analysis, 41(3), 443–456.

Jinzhao Chen. (2014). The impact of international financial integration on economic growth: New evidence on threshold effects. Economic Modelling, 42, 475–489.

Kalemli-Ozcan, S., Manganelli, S., Central Bank, E., Papaioannou, E., Luis, J., European, P., & Bank, C. (2008). Financial Integration and Risk Sharing: The Role of the Monetary Union. 5th European Central Banking Conference on The Euro at Ten: Lessons and Challenges.

Keller, W. (2010). International Trade, Foreign Direct Investment, and Technology Spillovers. Handbook of the Economics of Innovation, 2(1), 793–829.

Klein, M. W., & Olivei, G. P. (2008). Capital account liberalization, financial depth, and economic growth. Journal of International Money and Finance, 27(6), 861–875.

le Fort, G. (2000). The Chilean experience in capital account regulation. Conference on Developing Countries and the Global Financial Architecture.

Levine, R. (2001). International financial liberalization and economic growth. Review of International Economics, 9(4), 688–702.

Li, J., Miao, E., & Zhang, J. (2021). The legal environment, specialized investments, incomplete contracts, and labor productivity. China Economic Review, 66, 101583.

MacDonald, M. (2015). Patterns of International Capital Flows and Productivity Growth: New Evidence. Review of International Economics, 23(5), 846–872.

Martikainen, J. P. (2019). Response to ‘A comparative analysis of electricity generation costs from renewable, fossil fuel and nuclear sources in G20 countries for the period 2015–2030.’ Journal of Cleaner Production, 208, 142–143.

Mc Morrow, K. , Roger, W., & Turrini, A. (2010). Determinants of TFP growth: a close look at industries driving the EU–US TFP gap. Structure Change Economic Dynamic, 21(3), 165–180.

Mittelman, J. H., & Pasha, M. K. (1997). Received Ideas and International Institutions. In Out from Underdevelopment Revisited. Palgrave Macmillan, London.

Moon, H. C., Cheng, J. L. c., Kim, M. Y., & Kim, J. U. (2011). FDI, economic decline and recovery: Lessons from the Asian financial crisis. Multinational Business Review, 19(2), 120–132.

Narayana, M. R. (2015). India’s Age Structure Transition, Sectoral Labor Productivities, and Economic Growth: Evidence and Implications Based on National Transfer Accounts. Population Research and Policy Review, 34(3), 381–415.

Navaretti, G. B., & Venables, A. J. (2020). Multinational Firms in the World Economy. In Multinational Firms in the World Economy. Princeton University Press.

Newman, C., Rand, J., Talbot, T., & Tarp, F. (2015). Technology transfers, foreign investment and productivity spillovers. European Economic Review, 76, 168–187.

Nwaogu, U. G., & Ryan, M. J. (2015). FDI, Foreign Aid, Remittance and Economic Growth in Developing Countries. Review of Development Economics, 19(1), 100–115.

Obstfeld, M. (1998). The Global Capital Market: Benefactor or Menace? Journal of Economic Perspectives, 12(4), 9–30.

Ockwell, D., Watson, J., MacKerron, G., Pal, P., & Yamin, F. (2008). Key policy considerations for facilitating low carbon technology transfer to developing countries. Energy Policy, 36, 4104–4115.

OECD. (2013). “Labour productivity growth” in OECD Factbook 2013: Economic, Environmental and Social Statistics.

OECD. (2021). OECD Economic Outlook, Interim Report September 2021. OECD.

Porter, M. E. (1985). On Competition Updated and Expanded Edition. Harvard Business School Publishing Corporation.

Rahman, M. M. (2021). The dynamic nexus of energy consumption, international trade and economic growth in BRICS and ASEAN countries: A panel causality test. Energy, 229, 120679.

Retno, R. D., & Priantinah, D. (2012). Pengaruh Good Corporate Governance Dan Pengungkapan Corporate Social Responsibility Terhadap Nilai Perusahaan (Studi Empiris Pada Perusahaan Yang Terdaftar Di Bursa Efek Indonesia Periode 2007-2010). Nominal: Barometer Riset Akuntansi Dan Manajemen, 1(2), 99–103.

Rey, S., & Hazem, S. (2020). Labor Productivity and Economic Growth in a Hydrocarbon-Dependent Economy: The Algerian Case, 1984–2015. European Journal of Development Research, 32(3), 587–611.

Samargandi, N., Fidrmuc, J., & Ghosh, S. (2015). Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries. World Development, 68(1), 66–81.

Simionescu, M. (2016). The relation between economic growth and foreign direct investment during the economic crisis in the European Union. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Časopis Za Ekonomsku Teoriju i Praksu, 34(1), 187–213.

Sokhanvar, A. (2019). Does foreign direct investment accelerate tourism and economic growth within Europe? Tourism Management Perspectives, 29, 86–96.

Thanh, S. D., Canh, N. P., & Schinckus, C. (2019). Impact of foreign direct investment, trade openness and economic institutions on growth in emerging countries: The case of Vietnam. Journal of International Studies, 12(3), 243–264.

Uctum, M., & Uctum, R. (2011). Crises, portfolio flows, and foreign direct investment: An application to Turkey. Economic Systems, 35(4), 462–480.

UNCTAD. (2014). Science, technology and innovation capability gaps, policy environment, and evolving policy tools for sustainable development.

UNCTAD. (2019). Global foreign direct investment slides for third consecutive year.

UNCTC. (1987). Transnational Corporations and Technology transfer: Effects and Policy Issues.

Vujanović, N., Stojčić, N., & Hashi, I. (2021). FDI spillovers and firm productivity during crisis: Empirical evidence from transition economies. Economic Systems, 45(2).

Wang, E. C. (2010). Determinants of R&D investment: The extreme-bounds-analysis approach applied to 26 OECD countries. Research Policy, 39, 103–116.

Wang, J., & Wang, X. (2015). Benefits of foreign ownership: evidence from foreign direct investment in China. Journal International Economic, 97(2), 325–328.

World Bank. (2013). Trends and Determinants of Foreign Direct Investment in South Asia.

World Bank. (2021). A World Bank Group Flagship Report 30th anniversary edition Global Economic Prospects.

Xu, B. (2000). Multinational enterprises, technology diffusion, and host country productivity growth. Journal of Development Economics, 62, 477–493.

Xu, B., & Chiang, E. P. (2005). Trade, patents and international technology diffusion. The Journal of International Trade & Economic Development, 14, 115–135.



  • There are currently no refbacks.

Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0