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China’s Exports and Foreign Direct Investment

  • Bhatt, P.R.
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    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.

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    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 13 (2013)
    Issue (Month): 2 ()
    Pages: 183-196

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    Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_13
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    1. Thornton, John, 1996. "Cointegration, causality and export-led growth in Mexico, 1895-1992," Economics Letters, Elsevier, vol. 50(3), pages 413-416, March.
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    7. Liu, Xiaming & Wang, Chengang & Wei, Yingqi, 2001. "Causal links between foreign direct investment and trade in China," China Economic Review, Elsevier, vol. 12(2-3), pages 190-202.
    8. Helleiner, Gerald K, 1973. "Manufactured Exports from Less-Developed Countries and Multinational Firms," Economic Journal, Royal Economic Society, vol. 83(329), pages 21-47, March.
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