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Impact of Foreign Direct Investment on Trade Balance: Evidence from Cote d’Ivoire

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  • Yaya Keho

Abstract

Foreign direct investment (FDI) inflows have been increasing in developing countries over the past decades. However, there is only a few evidence about their impact on the trade balance on the recipient countries. This study empirically examines the issue for Cote d’Ivoire from 1980 to 2017. To that end, we extend the traditional trade balance function to include FDI and employ alternative cointegration testing and estimation methods. The results show that domestic income, real effective exchange rate and foreign direct investment are important drivers of trade balance. A real depreciation of domestic currency improves the trade balance both in the long and short run, thus consistent with Marshall-Lerner condition. Furthermore, FDI adversely affects trade balance in the long run.

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  • Yaya Keho, 2020. "Impact of Foreign Direct Investment on Trade Balance: Evidence from Cote d’Ivoire," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(7), pages 113-113, July.
    • Handle: RePEc:ibn:ijefaa:v:12:y:2020:i:7:p:113
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    Cited by:

    1. Yaya Keho, 2021. "Real Exchange Rate and Trade Balance Dynamics in Cote d Ivoire," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 61-70.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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