An initial push for successful transition from import substitution to export-orientation in Taiwan and China: The FDI-led hypothesis
AbstractThis paper examines the association between government policy interventions, Foreign Direct Investment (FDI) and exports in Taiwan and China by applying the LP (Lumsdaine and Papell, 1997), approach allowing two endogenous structural breaks. This paper further explores the cointegrating relationship between FDI and exports in Taiwan by using the Johansen and Juselius (1990) approach and causal relationships between FDI and exports in both Taiwan and China by using the Granger causality tests respectively. We found that significant trend breaks in the FDI and export time series detected in both countries coincided with extensive government interventions, mainly in the form of Export Processing Zones (EPZ), encouraging FDI during a transition period from import substitution to export orientation. The results emerging from our research indicate no long-run cointegrating relationship in Taiwan and one-way causal relationship flows from exports to FDI in China and FDI to exports in Taiwan. The growing fear is that the World Trade Organisation’s (WTO) involvement in deregulating EPZs may narrow the differences between the zones and the rest of the economy and prevent new firms from entering the zones. The EPZs may no longer be the transitional strategy for poor/developing countries.
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Bibliographic InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-03.
Length: 20 pages
Date of creation: 2007
Date of revision:
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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
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More information through EDIRC
FDI; Exports; EPZ; structural breaks; causality; East Asia;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-20 (All new papers)
- NEP-CNA-2007-07-20 (China)
- NEP-DEV-2007-07-20 (Development)
- NEP-INT-2007-07-20 (International Trade)
- NEP-SEA-2007-07-20 (South East Asia)
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.:
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