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Outward FDI and Domestic Investment

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Author Info

  • Dierk Herzer
  • Mechthild Schrooten

Abstract

This paper examines the impact of outward foreign direct investment (OFDI) on domestic investment by applying co-integration techniques to macroeconomic time series data for the United Sates and Germany. We show that the two countries differ: In the case of the US, OFDI has positive long-run effects on domestic investment while in the case of Germany the reverse effect is reported.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55853.de/dp679.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 679.

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Length: 14 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp679

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Keywords: Foreign Direct Investment; Investment; Open Economy Macroeconomics;

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References

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  1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  2. René Belderbos, 1992. "Large multinational enterprises based in a small economy: Effects on domestic investment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(3), pages 543-557, September.
  3. Robert E. Lipsey & Guy V.G. Stevens, 1988. "Interactions between Domestic and Foreign Investment," NBER Working Papers 2714, National Bureau of Economic Research, Inc.
  4. Martin Feldstein, 1994. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Working Papers 4668, National Bureau of Economic Research, Inc.
  5. Mihir C. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," NBER Working Papers 11075, National Bureau of Economic Research, Inc.
  6. Phillips, Peter C B & Loretan, Mico, 1991. "Estimating Long-run Economic Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 407-36, May.
  7. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
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Citations

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Cited by:
  1. Wen-Chung Hsu & Xingbo Gao & Jianhua Zhang & Hsin Mei Lin, 2011. "The effects of outward FDI on home-country productivity: Do location of investment and market orientation matter?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(2), pages 99-116, June.
  2. Di Iorio, Francesca & Fachin, Stefano, 2012. "A note on the estimation of long-run relationships in panel equations with cross-section linkages," Economics Discussion Papers 2012-1, Kiel Institute for the World Economy.
  3. Arndt, Christian & Buch, Claudia M. & Schnitzer, Monika, 2007. "FDI and Domestic Investment: An Industry-Level View," CEPR Discussion Papers 6464, C.E.P.R. Discussion Papers.
  4. goh, sookhoon, 2012. "Could inward FDI offset the substitution effect of outward FDI on domestic investment? evidence from Malaysia," MPRA Paper 43237, University Library of Munich, Germany.
  5. Ali J Al-sadiq, 2013. "Outward Foreign Direct Investment and Domestic Investment," IMF Working Papers 13/52, International Monetary Fund.

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