IDEAS home Printed from https://ideas.repec.org/a/aiy/journl/v8y2022i4p340-355.html
   My bibliography  Save this article

FDI outflows and international trade nexus: Empirical evidence from country income groups

Author

Listed:
  • Osarumwense Osabuohien-Irabor

    (Ural Federal University, Ekaterinburg, Russia; Ambrose Alli University, Ekpoma, Nigeria)

  • Igor M. Drapkin

    (Ural Federal University, Ekaterinburg, Russia)

Abstract

Relevance. Outward foreign direct investment (OFDI) and international trade are traditionally viewed as key drive of economic integration and globalization. At the same time, the relationship between these phenomena is ambiguous both from theoretical and empirical points of view. This study contributes to the existing literature by analyzing the relationship between outward foreign direct investment and international trade for countries with different levels of income per capita. Research objectives. This study examines the dynamic interplay between OFDI and international trade in different income groups such as low-income (LIC), low-middle income (LMIC), upper-middle income (UMIC), and high-income (HIC) groups. Data and methods. Based on World bank country income classifications, data from 161 countries are divided into LIC, LMIC, UMIC, and HIC for the period 1998-2019. The study employs the Difference (DFF-GMM) and two-step System Generalized Method of Moments (SYS-GMM) techniques to explore the OFDI-trade nexus. Results. The results are mixed and significant providing support for both complementarity and substitutive FDI. Findings suggest that OFDI and trade nexus in LIC have negative impact indicating a substitutive effect, but in other economies, the impact is significantly positive and complementary. Conclusions. Trade and OFDI nexus are substitutive in LIC, hence sound economic policy, aimed at increasing country's international competitiveness, should be adopted. However, trade and OFDI in LMIC, UMIC and HIC economies have mutually complementary relationship that facilitates the improvement of the domestic economy. Thus, government should promote policies that sustain the benefits of OFDI and trade interactions.

Suggested Citation

  • Osarumwense Osabuohien-Irabor & Igor M. Drapkin, 2022. "FDI outflows and international trade nexus: Empirical evidence from country income groups," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 8(4), pages 340-355.
  • Handle: RePEc:aiy:journl:v:8:y:2022:i:4:p:340-355
    DOI: https://doi.org/10.15826/recon.2022.8.4.026
    as

    Download full text from publisher

    File URL: https://journals.urfu.ru/index.php/r-economy/article/view/6492
    Download Restriction: no

    File URL: https://libkey.io/https://doi.org/10.15826/recon.2022.8.4.026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Outward FDI; trade; exports; imports; system GMM; country income groups;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    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:aiy:journl:v:8:y:2022:i:4:p:340-355. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Irina Turgel (email available below). General contact details of provider: https://edirc.repec.org/data/seurfru.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.