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Outward FDI, Total Factor Productivity and Domestic Output: Evidence from Germany

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  • Dierk Herzer

Abstract

This paper examines the impact of outward FDI on domestic output and total factor productivity by applying cointegration techniques to macroeconomic time series data for Germany. We find a positive relationship between outward FDI and domestic output as well as between outward FDI and total factor productivity. Furthermore, our results indicate that there is bidirectional causality between outward FDI and domestic output, and outward FDI and total factor productivity, suggesting that increased output and productivity are both a consequence and a cause of increased outward FDI. Overall, the results of this paper can be interpreted as evidence of productivity-enhancing, and thus growth-enhancing, effects of outward FDI, which is inconsistent with the simplistic idea that outward investment represents a diversion of domestic economic activity.

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File URL: http://hdl.handle.net/10.1080/10168737.2010.538430
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 26 (2012)
Issue (Month): 1 (October)
Pages: 155-174

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Handle: RePEc:taf:intecj:v:26:y:2012:i:1:p:155-174

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Cited by:
  1. Bilal Kargi, 2014. "Portfolio In Turkish Economy, And A Long Termed Relation Between Foreign Direct Investments And The Growth, And The Structural Breakage Analysis (1980-2012)," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 6(1 (March)), pages 70-81.
  2. Fabrizio Coricelli & Andreas Wörgötter, 2012. "Structural Change and the Current Account: The Case of Germany," OECD Economics Department Working Papers 940, OECD Publishing.

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