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Foreign direct investment and international trade: evidence from the US and Japan

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  • Jyothi Pantulu
  • Jessie P.H. Poon
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    Abstract

    This paper examines the question of whether foreign direct investment (FDI) creates or replaces international trade. Theoretical and empirical studies in the past have shown that FDI tends to replace trade, but more recent evidence suggests the opposite, that is, FDI creates and complements trade. We analyse the outward investment of Japan and the United States to 29 and 32 countries respectively for the period 1996 to 1999. Our analysis indicates that trade creating effect dominates on the whole, and that this effect also varies significantly across countries. Copyright 2003, Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Journal of Economic Geography.

    Volume (Year): 3 (2003)
    Issue (Month): 3 (July)
    Pages: 241-259

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    Handle: RePEc:oup:jecgeo:v:3:y:2003:i:3:p:241-259

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    Cited by:
    1. CUYVERS, Ludo & PLASMANS, Joseph & SOENG, Reth & VAN DEN BULCKE, Daniël, 2008. "Determinants of foreign direct investment in Cambodia: Country-specific factor differentials," Working Papers 2008003, University of Antwerp, Faculty of Applied Economics.
    2. repec:ebl:ecbull:v:6:y:2004:i:2:p:1-8 is not listed on IDEAS
    3. Raphaël Chiappini, 2013. "Do Overseas investments create or replace trade? New insights from a macro-sectoral study on Japan," Working Papers hal-00854109, HAL.
    4. Zwinkels, Remco C.J. & Beugelsdijk, Sjoerd, 2010. "Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?," International Business Review, Elsevier, vol. 19(1), pages 102-115, February.
    5. José Pedro Pontes, 2003. "A Theory of the Relationship Between Foreign Direct Investment and Trade," Working Papers Department of Economics 2003/11, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    6. Raphaël Chiappini, 2013. "Do Overseas Investments Create or Replace Trade? New insights from a Macro-Sectoral Study on Japan," GREDEG Working Papers 2013-24, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis, revised Mar 2014.
    7. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2008. "Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective," MPRA Paper 12245, University Library of Munich, Germany.
    8. Cuyvers, Ludo & Soeng, Reth & Plasmans, Joseph & Van Den Bulcke, Daniel, 2011. "Determinants of foreign direct investment in Cambodia," Journal of Asian Economics, Elsevier, vol. 22(3), pages 222-234, June.
    9. Timo Mitze & Björn Alecke & Gerhard Untiedt, 2009. "Trade-FDI Linkages in a System of Gravity Equations for German Regional Data," Ruhr Economic Papers 0084, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Tolentino, Paz Estrella, 2010. "Home country macroeconomic factors and outward FDI of China and India," Journal of International Management, Elsevier, vol. 16(2), pages 102-120, June.
    11. Groh, Alexander Peter & Wich, Matthias, 2012. "Emerging economies' attraction of foreign direct investment," Emerging Markets Review, Elsevier, vol. 13(2), pages 210-229.

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