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The trade balance effects of U.S. foreign direct investment in Mexico

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  • Peter Wilamoski
  • Sarah Tinkler

Abstract

This paper examines the effect of U.S. foreign direct investment (FDI) in Mexico on U.S. exports to and imports from Mexico. The rise of intrafirm exports and imports following U.S. FDI in Mexico suggests that FDI affects trade flows. Empirical estimation proceeds with tests for stationarity and cointegration. The finding of cointegration among the variables leads to estimation of the hypothesized relationships with a vector error-correction model. Impulse response functions and variance decomposition reveal that FDI leads to increased exports and imports during the time period considered. Copyright International Atlantic Economic Society 1999

Suggested Citation

  • Peter Wilamoski & Sarah Tinkler, 1999. "The trade balance effects of U.S. foreign direct investment in Mexico," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(1), pages 24-37, March.
    • Handle: RePEc:kap:atlecj:v:27:y:1999:i:1:p:24-37
    DOI: 10.1007/BF02299175
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    References listed on IDEAS

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    1. James A. Orr, 1991. "The trade balance effects of foreign direct investment in U.S. manufacturing," Quarterly Review, Federal Reserve Bank of New York, vol. 16(Sum), pages 63-76.
    2. James R. MARKUSEN, 2021. "Factor Movements And Commodity Trade As Complements," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 15, pages 325-340, World Scientific Publishing Co. Pte. Ltd..
    3. Magnus Blomstrom & Robert E. Lipsey & Ksenia Kulchycky, 1988. "U.S. and Swedish Direct Investment and Exports," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 257-302, National Bureau of Economic Research, Inc.
    4. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    5. Robert E. Baldwin, 1988. "Trade Policy Issues and Empirical Analysis," NBER Books, National Bureau of Economic Research, Inc, number bald88-2, March.
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    Cited by:

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    2. Muhammad Ahad, 2017. "Impact of Financial Development on Trade Balance: An ARDL Cointegration and Causality Approach for Pakistan," Global Business Review, International Management Institute, vol. 18(5), pages 1199-1214, October.
    3. I.M. Drapkin & S.A. Lukyanov & R.I. Groznykh, 2020. "Foreign Direct Investment and International Trade: Empirical Analysis of Mutual Influence," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(4), pages 441-457.
    4. Yongqing Wang & Guanghua Wan, 2008. "China's Trade Imbalances: The Role of FDI," WIDER Working Paper Series RP2008-103, World Institute for Development Economic Research (UNU-WIDER).
    5. Ubaidillah, Nur Zaimah & Ab. Rahim, Rossazana, 2012. "A Multivariate Cointegration Analysis Of The Role Of Exports To Main Trading Partners In The Malaysian Macroeconomics," MPRA Paper 39706, University Library of Munich, Germany.
    6. Gulzar Ali & Ghulam Mustafa & Said Zamin Shah, 2020. "Performance of Agriculture Sector in Foreign Trade of Pakistan," Global Economics Review, Humanity Only, vol. 5(1), pages 12-23, March.
    7. Wei Sun & Lian An, 2011. "Dynamics of floating exchange rate: how important are capital flows relative to macroeconomic fundamentals?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(4), pages 456-472, October.
    8. Tiia Vissak, 2001. "The impact of foreign direct investments on host country’s exports," University of Tartu - Faculty of Economics and Business Administration, in: Urmas Varblane (ed.), Foreign Direct Investments in the Estonian Economy, edition 1, volume 9, chapter 5, pages 269-306, Faculty of Economics and Business Administration, University of Tartu (Estonia).

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