Foreign Direct Investment and Services Trade: Evidence from Malaysia and Singapore
AbstractServices trade is an important source of growth in Malaysia and Singapore. Both economies are export-oriented and actively court foreign direct investment (FDI) to advance their economic objectives of industrialization and economic development. This paper examines the causal linkages between inward FDI and the country's engagement in services trade in bi-variate and tri-variate VAR frameworks. The empirical findings for Singapore show evidence of bi-directional causality between inward FDI and the total trade volume in services (i.e. the absolute sum of payments and receipts) as well as between FDI and services imports (in the tri-variate specification). This may reflect her relative open foreign investment policy and free trade regime in services. For Malaysia, the evidence of causality is weaker and uni-directional, from inward FDI to services imports. These findings are consistent with the different stages of economic development and openness attained by the two sample countries, and they provide useful background for trade and foreign investment policies and development strategies.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Global Economic Review.
Volume (Year): 38 (2009)
Issue (Month): 3 ()
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Other versions of this item:
- Koi Nyen Wong & Tuck Cheong & Dietrich K. Fausten, 2007. "Foreign Direct Investment And Services Trade: Evidence From Malaysia And Singapore," Monash Economics Working Papers 30-07, Monash University, Department of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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