Iosr Journal Of Economics And Finance (Iosr-Jef) E-Issn: 2321-5933,P-Issn: 2321-5925.Volume 14, Issue 4 Ser. III (July. – August. 2023),Pp 49-57 Www.Iosrjournals.Org DOI: 10.9790/5933-1404034957 www.iosrjournals.org 49 | Page Unlocking Economic Growth In Lebanon: The Role Of Foreign Direct Investment And Financial Development Riad Makdissi * , Joseph Fenianos * , Selim Mekdessi * * (Faculty of Economics and Business Administration, Lebanese University, Lebanon) Abstract: Foreign direct investment (FDI) is a key driver of economic growth in developing countries. It involves the investment of capital by individuals or companies from one country in the economic interests of another country, often with the aim of taking long-term control of a foreign company. FDI can take various forms, including private investment in buying shares in foreign companies, as well as administrative or technical arrangements 1 . Economic growth refers to the expansion of the market value of goods and services in an economy over time, taking inflation into account. One of the most common methods used to measure economic growth is to observe the proportional increase in real GDP. FDI has been identified as a fundamental solution to economic underdevelopment, and it can help fill technology and resource gaps in developing countries 2 . The aim of this research is to investigate the impact of FDI and financial development on economic growth in Lebanon. Specifically, the study will examine how FDI can contribute to economic growth in developing countries, and how developing country governments can effectively promote and regulate FDI to maximize its economic benefits. The research will also analyze the effect of changes in the financial situation on the growth of economic growth in terms of GDP. Given the presence of FDI in Lebanon and the significant decline in financial situation due to political instability and hyperinflation, the use of FDI to boost Lebanon's economic growth could be seen as a way to mitigate the country's financial crisis. Key Word: Foreign Direct Investment; Economic growth, Lebanon, Financial crisis. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 06-08-2023 Date of Acceptance: 16-08-2023 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Foreign direct investment (FDI) occurs when a company or individual from one country invests in economic interests in another country. FDI is not only private investment in buying shares in foreign companies, but it can also involve multiple financial obligations and administrative or technical arrangements 3 . The establishment of effective control over a foreign company or the establishment of significant influence over its decisions defines FDI. Economic growth, on the other hand, refers to the increase or expansion of the market value of goods and services in the economy over time, taking inflation into account 2 . According to Shahbaz and Rahman 4 , one of the common methods used to measure economic growth is to observe the proportional increase in real GDP. FDI has been one of the fundamental solutions to economic underdevelopment in the economic development literature. FDI allows individuals or firms to invest in a company operating in a foreign country to take long-term control of that company 5 . Economic deregulation is essential for capital flows, risk spreading and promoting economic growth. It contributes to the widespread practice among governments of easing restrictions on capital inflows (including tax incentives) throughout growth phases 6 . The most common methods of transferring international remittances are foreign private investment and official development assistance 7 . FDI is mainly composed of multinational enterprises that directly own and manage enterprises in the host country, although portfolio investment does not imply direct control over investing companies. The challenge is how to leverage FDI to promote economic growth in developing countries. Therefore, the research question is: "What is the impact of foreign direct investment on economic growth in developing countries?" The objective of this research is therefore to understand how foreign direct investment (FDI) can contribute to economic growth in developing countries. Specific research questions include: How can FDI help fill technology and resource gaps in developing countries? How can FDI help boost economic growth in developing countries? How can developing country governments effectively promote and regulate FDI to maximize its economic benefits?