IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v12y2020i7p113.html
   My bibliography  Save this article

Impact of Foreign Direct Investment on Trade Balance: Evidence from Cote d’Ivoire

Author

Listed:
  • Yaya Keho

Abstract

Foreign direct investment (FDI) inflows have been increasing in developing countries over the past decades. However, there is only a few evidence about their impact on the trade balance on the recipient countries. This study empirically examines the issue for Cote d’Ivoire from 1980 to 2017. To that end, we extend the traditional trade balance function to include FDI and employ alternative cointegration testing and estimation methods. The results show that domestic income, real effective exchange rate and foreign direct investment are important drivers of trade balance. A real depreciation of domestic currency improves the trade balance both in the long and short run, thus consistent with Marshall-Lerner condition. Furthermore, FDI adversely affects trade balance in the long run.

Suggested Citation

  • Yaya Keho, 2020. "Impact of Foreign Direct Investment on Trade Balance: Evidence from Cote d’Ivoire," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(7), pages 113-113, July.
  • Handle: RePEc:ibn:ijefaa:v:12:y:2020:i:7:p:113
    as

    Download full text from publisher

    File URL: http://www.ccsenet.org/journal/index.php/ijef/article/download/0/0/43154/45165
    Download Restriction: no

    File URL: http://www.ccsenet.org/journal/index.php/ijef/article/view/0/43154
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, School of Economics, University of Kent.
    2. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2013. "Trade linkages of inward and outward FDI: Evidence from Malaysia," Economic Modelling, Elsevier, vol. 35(C), pages 224-230.
    5. Olugbenga Onafowora, 2003. "Exchange rate and trade balance in east asia: is there a J-curve?," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-13.
    6. 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.
    7. Aniekan Okon AKPANSUNG & Sikiru Jimoh BABALOLA, 2013. "Effects of Real Exchange Rate on Trade Balance: Empirical Evidence from Nigeria," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(5), pages 605-617.
    8. Thi Anh-Dao Tran & Thi Thanh Binh Dinh, 2014. "FDI inflows and trade imbalances: evidence from developing Asia," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(1), pages 147-169, June.
    9. Prince Jaiblai & Vijay Shenai, 2019. "The Determinants of FDI in Sub-Saharan Economies: A Study of Data from 1990–2017," IJFS, MDPI, vol. 7(3), pages 1-31, August.
    10. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-328, August.
    11. Mohsen Bahmani-Oskooee & Abera Gelan, 2012. "Is there J-Curve effect in Africa?," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(1), pages 73-81, June.
    12. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yaya Keho, 2021. "Real Exchange Rate and Trade Balance Dynamics in Cote d Ivoire," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 61-70.
    2. Ismat Nasim & Mohamed Boukhris & Umar Nawaz Kayani & Farrukh Bashir & Syed Arslan Haider, 2023. "Exploring the Links between Renewable Energy, FDI, Environmental Degradation, and International Trade in Selected Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 418-429, November.
    3. Gbenga Festus Babarinde, 2020. "The Role of Foreign Direct Investment in Stock Market Development in Nigeria: A Test of Complementarity," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 12(2), pages 175-187, December.
    4. Aastha Khera & Neelam Dhanda, 2020. "Empirical Relationship between Macroeconomic Variables and Stock Prices of Indian Banking Sector: A Vector Error Correction Model Approach," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 12(2), pages 189-198, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yaya Keho, 2021. "Real Exchange Rate and Trade Balance Dynamics in Cote d Ivoire," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 61-70.
    2. Dierk Herzer & Stephan Klasen & Felicitas Nowak-Lehmann D., 2006. "In search of FDI-led growth in developing countries," Ibero America Institute for Econ. Research (IAI) Discussion Papers 150, Ibero-America Institute for Economic Research.
    3. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    4. Akintoye V. Adejumo & Simplice A. Asongu, 2019. "Foreign Direct Investment, Domestic Investment and Green Growth in Nigeria: Any Spillovers?," Working Papers of the African Governance and Development Institute. 19/078, African Governance and Development Institute..
    5. Debashis Chakraborty & Jaydeep Mukherjee & Tanaya Sinha, 2012. "Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis," Global Business Review, International Management Institute, vol. 13(3), pages 433-447, October.
    6. Muhammad Arshad Khan, 2007. "Foreign Direct Investment and Economic Growth: The Role of Domestic Financial Sector," PIDE-Working Papers 2007:18, Pakistan Institute of Development Economics.
    7. Dube, Smile, 2009. "Foreign Direct Investment and Electricity Consumption on Economic Growth: Evidence from South Africa," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(2), pages 175-200.
    8. Acaravci, Ali & Ozturk, Ilhan, 2012. "Foreign Direct Investment, Export and Economic Growth: Empirical Evidence from New EU Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 52-67, June.
    9. Tang, Chor Foon, 2011. "Multivariate Granger Causality and the Dynamic Relationship between Health Care Spending, Income and Relative Price of Health Care in Malaysia," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(2), pages 199-214, December.
    10. Karimi, Mohammad Sharif & Yusop, Zulkornain, 2009. "FDI and Economic Growth in Malaysia," MPRA Paper 14999, University Library of Munich, Germany.
    11. Mounir Belloumi & Atef Alshehry, 2018. "The Impacts of Domestic and Foreign Direct Investments on Economic Growth in Saudi Arabia," Economies, MDPI, vol. 6(1), pages 1-17, March.
    12. Belloumi, Mounir, 2014. "The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model," Economic Systems, Elsevier, vol. 38(2), pages 269-287.
    13. Tang, Chor Foon, 2010. "The determinants of health expenditure in Malaysia: A time series analysis," MPRA Paper 24356, University Library of Munich, Germany.
    14. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    15. Bashiri Behmiri, Niaz & Pires Manso, José R., 2012. "Does Portuguese economy support crude oil conservation hypothesis?," Energy Policy, Elsevier, vol. 45(C), pages 628-634.
    16. Levent KORAP, 2008. "Exchange Rate Determination Of Tl/Us$:A Co-Integration Approach," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 7(1), pages 24-50, May.
    17. Mughal, Mazhar, 2008. "Boon or bane- role of FDI in the economic growth of Pakistan," MPRA Paper 16468, University Library of Munich, Germany.
    18. Akinlo Taiwo & Simon-Oke O. Olayemi, 2015. "Re-examine foreign direct investment and economic growth: Panel co-integration and causality tests for sub-Saharan African countries," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 18(1), pages 73-86, March.
    19. Mohammed Ershad Hussain & Mahfuzul Haque, 2016. "Foreign Direct Investment, Trade, and Economic Growth: An Empirical Analysis of Bangladesh," Economies, MDPI, vol. 4(2), pages 1-14, April.
    20. Armenia Androniceanu & Irina Georgescu & Ionuț Nica & Nora Chiriță, 2023. "A Comprehensive Analysis of Renewable Energy Based on Integrating Economic Cybernetics and the Autoregressive Distributed Lag Model—The Case of Romania," Energies, MDPI, vol. 16(16), pages 1-28, August.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ijefaa:v:12:y:2020:i:7:p:113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.