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China’s Exports and Foreign Direct Investment

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  • Bhatt, P.R.

Abstract

The objectives of the paper are to study foreign direct investment dimensions of China and to study causal relationship between exports, FDI and GDP. Vector autoregression model (VAR) is adopted to estimate the long run causal relationship among exports, foreign direct investment and GDP. The cointegration test result shows that there exist a long run equilibrium relationship among exports, FDI and GDP. In the estimated error correction model, FDI is a significant variable and the result indicates that 1% change of increase in FDI will lead to 0.04% change of increase in exports with one year time gap. Granger Causality test indicates that there is a unilateral relationship between exports and FDI and the direction is from FDI to exports which mean that FDI causes exports.

Suggested Citation

  • Bhatt, P.R., 2013. "China’s Exports and Foreign Direct Investment," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 183-196.
  • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_13
    as

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    References listed on IDEAS

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    1. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
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    More about this item

    Keywords

    FDI; Exports; China; Error Correction Model; Cointegration; Granger Causality.;

    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
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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