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Foreign Direct Investment and Trade: A Causality Analysis

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  • Oscar Bajo-Rubio

    ()

  • María Montero-Muñoz

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Abstract

In this article, we analyze the relationship between outward foreign direct investment (FDI) and exports, using Spanish quarterly data for the period 1977–1998, by means of Granger causality tests in a cointegration framework. Our results point to the existence of a relationship of complementarity between both variables, with Granger causality running in the short run from outward FDI to exports, and bilateral Granger causality in the long run. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
  • Handle: RePEc:kap:openec:v:12:y:2001:i:3:p:305-323
    DOI: 10.1023/A:1011185507169
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    References listed on IDEAS

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    1. Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
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    Citations

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    Cited by:

    1. Parikshit Basu & John Hicks & Richard Sappey, 2006. "Free Trade Agreements and Investment: A Chinese Perspective," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(2), pages 179-192.
    2. Pradhan, Jaya Prakash, 2007. "How Do Indian Multinationals Affect Exports from Home Country?," MPRA Paper 19022, University Library of Munich, Germany.
    3. M. T. Alguacil & V. Orts, 2003. "Inward Foreign Direct Investment and Imports in Spain," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 19-38.
    4. Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
    5. Raphaël Chiappini, 2016. "Do overseas investments create or replace trade? New insights from a macro-sectoral study on Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(3), pages 403-425, June.
    6. Oscar Bajo & María Montero, "undated". "Foreign direct investment and trade: A causality analysis," Studies on the Spanish Economy 06, FEDEA.
    7. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2009. "Trade-FDI Linkages in a System of Gravity Equations for German Regional Data," Ruhr Economic Papers 84, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2008. "Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective," MPRA Paper 12245, University Library of Munich, Germany.
    9. Padilla, Ramón & Gomes Nogueira, Caroline, 2015. "Determinants and home-country effects of FDI outflows: Evidence from Latin American countries," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 166, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. de Boyrie Maria E, 2010. "Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997," Global Economy Journal, De Gruyter, vol. 9(4), pages 1-40, January.
    11. Emilia Penkova-Pearson, 2012. "Trade, convergence and exchange rate regime: evidence from Bulgaria and Romania," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 1(1), pages 107-139.
    12. Mariam Camarero & Cecilio Tamarit, 2003. "Estimating exports and imports demand for Manufactured goods: The role of FDI," European Economy Group Working Papers 22, European Economy Group.
    13. Yan Chen & Wen-Chung Hsu & Chengqi Wang, 2012. "Effects of outward FDI on home-country export competitiveness: The role of location and industry heterogeneity," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(1), pages 56-73, February.
    14. Raphaël Chiappini, 2012. "Un réexamen de la relation entre commerce et Investissement Direct à l'étranger (IDE) à partir d'un modèle en panel dynamique Le cas de l'Allemagne, la France et l'Italie," Working Papers hal-00744405, HAL.
    15. Zhang Yi, 2009. "Unravelling the Complex Motivations behind China’s FDI," Working Papers 09-02, Utrecht School of Economics.
    16. Raphaël Chiappini, 2012. "Un réexamen de la relation entre commerce et Investissement Direct à l’étranger (IDE) à partir d’un modèle en panel dynamique Le cas de l’Allemagne, la France et l’Italie," Larefi Working Papers 1204, Larefi, Université Bordeaux 4.

    More about this item

    Keywords

    foreign direct investment; exports; Granger causality;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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