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Outward FDI, merchandise and services trade: evidence from Singapore

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  • Wong, Koi Nyen
  • Goh, Soo Khoon

Abstract

This paper aims to explore the causality pattern between OFDI and major external trade components (i.e. exports and imports of merchandise as well as services) using Singapore as a case, since it is one of the largest outward investors in the Asian region, and is overtly trade-dependent. The findings reveal that there is evidence of OFDI-led trade hypothesis, particularly, merchandise exports and imports, an indication for OFDI to open up important channels for intra-firm trade activities, home country sourcing and backward integration. However, there is no evidence of causality relationships between Singapore’s OFDI and services trade because the nature of services is mainly to provide market presence in the consuming country. As such, Singaporean multinationals are likely to outsource their services either from the host country services sector or their own services-supporting subsidiaries that have been relocated abroad. The present study provides implications for policy formulation on strengthening the OFDI-services trade linkages.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35377.

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Date of creation: Jul 2011
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Handle: RePEc:pra:mprapa:35377

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Keywords: Outward FDI; multinationals; Singapore; Granger causality; merchandise and services trade;

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Cited by:
  1. Bojnec, Štefan & Ferto, Imre, 2014. "Outward Foreign Direct Iinvestments and Merchandise Exports: The European OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 87-99, June.

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