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Trade and foreign direct investment in Latin America and Southeast Asia: temporal causality analysis

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Author Info
Luiz R. De Mello (University of Kent at Canterbury, UK)
Kiichiro Fukasaku (OECD Development Centre, Paris, France)

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Abstract

This paper examines the relationship between foreign trade and foreign direct investment (FDI) in selected Latin American and Southeast Asian economies in the period 1970 - 94. The hypothesis of complementarity|substitution between FDI and foreign trade is tested using bivariate VECM models and temporal causality analysis. The impact of FDI on the trade balance is also assessed and weak exogeneity tests are performed. It is found that the impact of FDI on the trade balance is stronger in trade-oriented economies, and that net FDI inflows are more sensitive to changes in exports in Southeast Asian countries, than in their Latin American counterparts, given the export-orientation of foreign investment in the former region. Copyright © 2000 John Wiley & Sons, Ltd.

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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 12 (2000)
Issue (Month): 7 ()
Pages: 903-924
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Handle: RePEc:wly:jintdv:v:12:y:2000:i:7:p:903-924

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pfaffermayr, M, 1994. "Foreign Direct Investment and Exports: A Time Series Approach," Applied Economics, Taylor and Francis Journals, vol. 26(4), pages 337-51, April.
  2. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "The capital inflows problem: Concepts and issues," MPRA Paper 13902, University Library of Munich, Germany. [Downloadable!]
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  3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  4. Geweke, John & Meese, Richard & Dent, Warren, 1983. "Comparing alternative tests of causality in temporal systems : Analytic results and experimental evidence," Journal of Econometrics, Elsevier, vol. 21(2), pages 161-194, February. [Downloadable!] (restricted)
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  6. V N Balasubramanyam & M Salisu & David Sapsford, . "Foreign Direct Investment and Growth: New Hypotheses and Evidence," Working Papers ec7/96, Department of Economics, University of Lancaster.
  7. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  8. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
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  9. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May. [Downloadable!] (restricted)
  10. Batra, Raveendra N & Ramachandran, Rama, 1980. "Multinational Firms and the Theory of International Trade and Investment," American Economic Review, American Economic Association, vol. 70(3), pages 278-90, June. [Downloadable!] (restricted)
  11. Romer, David, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 869-903, November. [Downloadable!] (restricted)
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  12. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February. [Downloadable!] (restricted)
  13. Lipsey, Robert E & Weiss, Merle Yahr, 1981. "Foreign Production and Exports in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 488-94, November. [Downloadable!] (restricted)
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  1. Tondl, Gabriele & Prüfer, Patricia, 2007. "Does it Make a Difference? Comparing Growth Effects of European and North American FDI in Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 26, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  2. M. T. Alguacil & V. Orts, . "Inward Foreign Direct Investment and Imports in Spain," Working Papers on International Economics and Finance 02-01, FEDEA. [Downloadable!]
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