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Estimating exports and imports demand for Manufactured goods: The role of FDI

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  • Mariam Camarero
  • Cecilio Tamarit

Abstract

In this paper we examine the joint performance of FDI and trade under a full liberalization process consistent with New Trade Theory models. The testing framework consists of the estimation of demand for exports and imports of manufactured goods for a panel containing the majority of the EU countries as well as the US and Japan. The model includes as explanatory factors, not only the traditional determinants of trade, but also new ones, such as the stock of foreign direct investment (FDI). We apply a variety of panel unit root and cointegration tests to the cases of both homogeneous and heterogeneous panels. Whereas there is no evidence of cointegration when using just the traditional formulation, the results are favorable to the existence of long-run relationships linking the variables of the augmented model. Moreover, the results point mainly to a complementarity relationship between trade and FDI.

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Bibliographic Info

Paper provided by European Economy Group in its series European Economy Group Working Papers with number 22.

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Length: 42 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:eeg:euroeg:22

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Postal: Despacho 104.Pabelloon de Segundo, Facultad de Economicas. Universidad Complutense de Madrid. 28223 Pozuelo de Alarcon, Madrid
Phone: 0034913942454
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Web page: http://www.ucm.es/info/econeuro
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Postal: Despacho 104.Pabelloon de Segundo, Facultad de Economicas. Universidad Complutense de Madrid. 28223 Pozuelo de Alarcon, Madrid
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References

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Citations

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Cited by:
  1. repec:cge:warwcg:14 is not listed on IDEAS
  2. Sourafel Girma, 2003. "Absorptive capacity and productivity spillovers From FDI: a threshold regression analysis," European Economy Group Working Papers 25, European Economy Group.
  3. Lundan, Sarianna M., 2007. "The Home Country Effects of Internationalisation," Discussion Papers 1100, The Research Institute of the Finnish Economy.
  4. Kichun Kang, 2012. "Is the "Houthakker-Magee" Finding Durable? Evidence from Disaggregated Trade Flows between China and Korea," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 299-316, November.
  5. Stirböck, Claudia, 2006. "How strong is the impact of exports and other demand components on German import demand? Evidence from euro-area and non-euro-area imports," Discussion Paper Series 1: Economic Studies 2006,39, Deutsche Bundesbank, Research Centre.
  6. Johnson, Andreas, 2006. "FDI and Exports: the case of the High Performing East Asian Economies," Working Paper Series in Economics and Institutions of Innovation 57, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  7. Menzie D. Chinn, 2005. "Supply Capacity, Vertical Specialization and Tariff Rates: The Implications for Aggregate U.S. Trade Flow Equations," NBER Working Papers 11719, National Bureau of Economic Research, Inc.
  8. Jaime Turrion & Carmela Martin, 2003. "Eastern Enlargement of the European Union and Foreign Direct Investment Adjustments," European Economy Group Working Papers 24, European Economy Group.

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