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Network analysis of trade and FDI

Author

Listed:
  • Deepika Srivastava

    (Ministry of Finance, Government of India)

  • M. Rahul

    (Institute of Economic Growth)

Abstract

In recent years, there has been a spectacular increase in trade and FDI flows. This increase in trade and FDI flows is not only between countries already linked in the past but also between countries with newly created links as reported by Fagiolo (in: Victor, Montgomery, Lubell (eds) The Oxford handbook of political networks. Oxford University Press, Oxford, 2006). This has led to a complex network of trade and FDI that connects many countries. This paper investigates the link between FDI and trade using techniques from network analysis. We study the features of the two networks and investigate whether a country’s economic size and geographical distance play an important role in network formation. We study the Trade and FDI networks over four periods and find that the two networks are strongly related to each other. Further, we find that the trade network is guided by the country’s geographic distance, while the location of a country does not seem to affect the FDI network. However, both networks can be explained by the country’s economic size.

Suggested Citation

  • Deepika Srivastava & M. Rahul, 2024. "Network analysis of trade and FDI," SN Business & Economics, Springer, vol. 4(1), pages 1-27, January.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:1:d:10.1007_s43546-023-00606-1
    DOI: 10.1007/s43546-023-00606-1
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    References listed on IDEAS

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    More about this item

    Keywords

    International trade and FDI network; Community detection; Hubs; QAP correlation;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • 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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