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A Panel Analysis of the FDI Impact on International Trade

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Author Info

  • Manuela Magalhães

    ()
    (NIPE - Research Unit in Economic Policies)

  • Ana Paula Africano

    ()
    (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto)

Abstract

This paper examines the relationship between Foreign Direct Investment (FDI) and international trade. Specifically, the relationship between the stocks of inward FDI and outward FDI, and Imports and Exports in the Portuguese economy. This paper also studies some technical problems associated with panel data, which have frequently been ignored in previous studies. The problems of serial and contemporaneous correlation have not been taken into account by a panel approach and, as we know, they can have an impact on estimates and statistical inferences. The results show that there exists a complementary relationship between trade and inward stock of FDI and also a country-specific effect on the corrected panel data of heteroscedasticity and correlation.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 235.

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Length: 17 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:por:fepwps:235

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Keywords: FDI; Trade; Gravity Analysis; Panel Data;

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References

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  1. Ana Paula Africano & Manuela Magalhaes, 2005. "FDI and Trade in Portugal: a gravity analysis," FEP Working Papers 174, Universidade do Porto, Faculdade de Economia do Porto.
  2. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
  3. Magnus Blomstrom & Ari Kokko, 1995. "Home Country Effects of Foreign Direct Investment: Evidence from Sweden," NBER Working Papers 4639, National Bureau of Economic Research, Inc.
  4. Markusen, James R. & Venables, Anthony J., 1996. "The Theory of Endowment, Intra-Industry and Multinational Trade," CEPR Discussion Papers 1341, C.E.P.R. Discussion Papers.
  5. Jonathan Eaton & Akilo Tamura, 1994. "Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns," Boston University - Institute for Economic Development 48, Boston University, Institute for Economic Development.
  6. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  7. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September.
  8. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
  9. Brenton, Paul & DiMauro, Francesca & Lücke, Matthias, 1998. "Economic integration and FDI: an empirical analysis of foreign investment in the EU and in Central and Eastern Europe," Kiel Working Papers 890, Kiel Institute for the World Economy.
  10. Isabelle Soubaya & Jean-Louis Mucchielli & Séverine Chédor, 2000. "Investissements directs à l'étranger des multinationales françaises et relations commerciales avec leurs filiales. Une analyse sur données individuelles d'entreprises," Revue économique, Presses de Sciences-Po, vol. 0(3), pages 747-760.
  11. Clausing, Kimberly A, 2000. "Does Multinational Activity Displace Trade?," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 190-205, April.
  12. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  13. Lionel Fontagné, 1999. "Foreign Direct Investment and International Trade: Complements or Substitutes?," OECD Science, Technology and Industry Working Papers 1999/3, OECD Publishing.
  14. Moulton, Brent R, 1987. "Diagnostics for Group Effects in Regression Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 275-82, April.
  15. Dunning, John H, 1979. "Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 269-95, November.
  16. Peter Egger & Michael Pfaffermayr, 2004. "Foreign Direct Investment and European Integration in the 1990s," The World Economy, Wiley Blackwell, vol. 27(1), pages 99-110, 01.
  17. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
  18. Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-22, February.
  19. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
  20. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  21. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Miguel Lebre de Freitas & Ricardo Paes Mamede, 2008. "Structural Transformation and the role of Foreign Direct Investment in Portugal: a descriptive analysis for the period 1990-2005," GEE Papers 0009, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Dec 2008.
  2. repec:pdn:wpaper:31 is not listed on IDEAS
  3. Carmen Fillat-Castej—n & Joseph Francois & Julia Woerz, 2008. "TRADE THROUGH FDI: investing in services," IIDE Discussion Papers 20080502, Institue for International and Development Economics.
  4. Miguel Lebre de Freitas & Ricardo Paes Mamede, 2011. "Structural transformation of Portuguese exports and the role of foreign-owned firms: A descriptive analysis for the period 1995-2005," Notas Económicas, Faculdade de Economia, Universidade de Coimbra, issue 33, pages 20-43, June.
  5. B. Michael Gilroy & Elmar Lukas & Christian Heimann, 2013. "Technologiestandort Deutschland und internationale Wissensspillover, Welchen Einfluss nehmen auslaendische MNU auf deutsche Exporte?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(5-6), pages 575-599, October.
  6. B. Michael Gilroy & Elmar Lukas & Christian Heimann, 2010. "Welchen Einfluss hat die Anwesenheit von ausländischen und multinationalen Unternehmungen auf die deutschen Exporte?," Working Papers CIE 31, University of Paderborn, CIE Center for International Economics.
  7. Georgescu, George, 2012. "Fluxurile ISD in contextul crizei globale
    [The FDI flows under the global crisis effects]
    ," MPRA Paper 40842, University Library of Munich, Germany.

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