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An empirical study on the long-term correlation between international trade and infl ow of Foreign Direct Investment based on Cointegration Theory: Evidence from China

Author

Listed:
  • QIU Bin

    (School of Economics and Management, Southeast University, Nanjing 210096, China)

  • TANG Baoqing

    (Jiangsu College of Economics and Trade, Nanjing 210007, China)

  • SUN Shaoqin

    (School of Economics and Management, Nanjing University of Information Science & Technology, Nanjing 210044, China)

Abstract

This paper studies the long-term relationship between FDI and imports and exports through evidence from China by using cointegration technology, and the Granger causality test shows that FDI had an obvious effect on imports and exports activities of foreign firms, and in the meantime, the imports and exports of foreign firms greatly promoted FDI. However, there is not a stable equilibrium between FDI and international trade in the long run for all firms in China. This paper provides some explanations for the possible reasons that cause the above difference in estimation results from the perspectives of both location and industry factors.

Suggested Citation

  • QIU Bin & TANG Baoqing & SUN Shaoqin, 2007. "An empirical study on the long-term correlation between international trade and infl ow of Foreign Direct Investment based on Cointegration Theory: Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 2(4), pages 607-622, December.
    • Handle: RePEc:fec:journl:v:2:y:2007:i:4:p:607-622
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-007-0031-z
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    More about this item

    Keywords

    international trade; FDI; long-term equilibrium; cointegration;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access

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