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Outward FDI and domestic investment in two industrialized countries

  • Herzer, Dierk
  • Schrooten, Mechthild

Using cointegration techniques, we find that in the US, outward FDI has positive long-run effects on domestic investment. In Germany, this complementary relationship exists only in the short run. In the long run, outward FDI substitutes for German domestic investment.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 99 (2008)
Issue (Month): 1 (April)
Pages: 139-143

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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:139-143
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  1. 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.
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  3. Stevens, Guy V. G. & Lipsey, Robert E., 1992. "Interactions between domestic and foreign investment," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 40-62, February.
  4. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  5. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  6. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
  7. Martin Feldstein, 1994. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Working Papers 4668, National Bureau of Economic Research, Inc.
  8. Mihir C. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," NBER Working Papers 11075, National Bureau of Economic Research, Inc.
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