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Trade and foreign direct investment: Evidence from South East European countries and new European Union member states

Author

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  • Bardhyl Dauti

    (University of Tetovo, Ilindenska road,Tetovo,Macedonia)

Abstract

The goal of this research is to provide an empirical assessment of the complementarity or substituting relationship between Trade and FDI in a link to country characteristics, using bilateral level data between FDI and trade for the period 1994 – 2010. In the research, an augmented gravity model has been used to test the relationship between Trade (both export and import), FDI stock and country characteristics between OECD-20 countries and SEE-5 and EU-NMS-10 countries. The empirical model considers how the relationship between FDI and Trade determine whether type of FDI into SEE-5 and EU-NMS-10 from core OECD-20 countries, is vertical or horizontal. With regard to the relationship between exports and FDI, the findings of the research showed mixed evidence, thus supporting vertical FDI for EU-NMS-10 countries, and horizontal FDI for SEE-5 countries. On the other hand, based on the relationship between imports and FDI, the results of the research supported vertical FDI for both EU-NMS-10 and SEE-5 group of countries. The basic conclusion is that the research provides an empirical evidence on the mixed nature of FDI into the host SEE-5 and EU-NMS-10 countries, supporting both complementary and substituting relationship between trade and FDI in the host countries.

Suggested Citation

  • Bardhyl Dauti, 2016. "Trade and foreign direct investment: Evidence from South East European countries and new European Union member states," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 34(1), pages 63-89.
    • Handle: RePEc:rfe:zbefri:v:34:y:2016:i:1:p:63-89
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    References listed on IDEAS

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    Cited by:

    1. Stanković Jelena J. & Džunić Marija & Milić Vesna Janković, 2019. "Competitiveness and the EU Accession Process: Can Candidate Countries Become Competitive as EU Countries?," Economic Themes, Sciendo, vol. 57(4), pages 415-432, December.
    2. Monireh Rafat, 2017. "The Interactive Relationship between Regional Trade Integration and Foreign Direct Investment," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 809-828, Autumn.
    3. Mariam Camarero & Sergi Moliner & Cecilio Tamarit, 2022. "Which are the long-run determinants of US outward FDI? Evidence using large long-memory panels," Working Papers 2210, Department of Applied Economics II, Universidad de Valencia.
    4. Igor Gurkov & Vladimir Kossov & Sergey Filippov, 2013. "Management practices in Russian multinational subsidiaries: the Case of knauf cis," HSE Working papers WP BRP 13/MAN/2013, National Research University Higher School of Economics.
    5. Bardhyl Dauti & Shiret Elezi, 2022. "Economic growth in the Central East European Union and the Western Balkan countries in the course of Stability and Growth Pact and COVID-19," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 40(1), pages 29-61.
    6. Radovan Kastratović, 2020. "The impact of foreign direct investment on host country exports: A meta‐analysis," The World Economy, Wiley Blackwell, vol. 43(12), pages 3142-3183, December.
    7. Elena Zavyalova & Dmitry Kucherov & Victoria Tsybova, 2017. "Human Resource Management at Russian Companies — Leaders of the Global Economy," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 11(4), pages 52-61.

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    More about this item

    Keywords

    foreign direct investment; trade; complements; substitutes; gravity model;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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