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Outward Foreign Direct Iinvestments and Merchandise Exports: The European OECD Countries

Author

Listed:
  • Bojnec, Štefan

    (Faculty of Management, University of Primorska, Slovenia.)

  • Ferto, Imre

    (Corvinus University of Budapest, Hungary and Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

Abstract

This paper tests whether outward foreign direct investments (FDI) serve as complements or substitutes to merchandise exports. A direct link between outward FDI and country-level merchandise bilateral exports between the European Organisation for Economic Cooperation and Development (OECD) countries is tested using a gravity model and four different econometric approaches with panel data analysis for the period 2004-2008. The model is specified with traditional gravity variables for gross domestic product and distance, and the variables of specific interest for outward FDI and related characteristics of countries and country pairs. We find that outward FDI reduces merchandise exports as there is a direct, negative outward FDI effect on the increase in bilateral merchandise exports. Internationalization of enterprises and economies through outward FDI serves as the merchandise exports substitutes likely causing home country regional production and employment.

Suggested Citation

  • Bojnec, Štefan & Ferto, Imre, 2014. "Outward Foreign Direct Iinvestments and Merchandise Exports: The European OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 87-99, June.
    • Handle: RePEc:rjr:romjef:v::y:2014:i:2:p:87-99
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    References listed on IDEAS

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    1. Tingting Xiong & Hao Sun, 2021. "Structure and dynamics of global capital and international trade: Analysis of the relationship between exports and foreign direct investment (FDI) from 2001 to 2006," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 542-559, January.
    2. Yaşar Turna, 2021. "Development of Import-Based Exports in Turkey: The ARDL Approach," Istanbul Business Research, Istanbul University Business School, vol. 50(1), pages 1-14, May.

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    More about this item

    Keywords

    foreign direct investment; gravity model; panel data analysis; merchandise exports; European OECD countries;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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