IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0291301.html
   My bibliography  Save this article

From short to long term: Dynamic analysis of FDI and net export in global regions

Author

Listed:
  • Sanduni Lakshani
  • Chanuka Sandaruwan
  • Chanaka Fernando
  • Gayan Vidyapathirana
  • Ruwan Jayathilaka
  • Sumudu Munasinghe

Abstract

It is crucial to examine the impact between foreign direct investment (FDI) and net exports (NE) for unveiling international trade dynamics, and the economic development of different geographical regions. It yields sharp insights into how FDI inflows, driven by theories such as backward linkage, export platform, and knowledge transfer, enhance a host country’s export capacity and contribute to economic growth. Moreover, studying the reciprocal linkages between FDI and NE helps recognise the aspects of domestic factors, such as productivity and the product life cycle, in attracting FDI and increasing export performance. Based on those theories, the study aims to ascertain the dynamic causality or correlation between FDI and NE across all regions with the utilisation of panel data gathered from 110 countries, considering the period from 2002 to 2020. The Wavelet coherence method is used to investigate the relationship between these variables across different frequencies and periods, followed by a Granger causality test. The findings demonstrated that FDI and NE have a significant relationship in most regions, with a bidirectional relationship between FDI and NE across all continents. The results could assist respective governments and policymakers in formulating policies related to FDI flows and offer insights into how a host country can attract more FDI and boost NE.

Suggested Citation

  • Sanduni Lakshani & Chanuka Sandaruwan & Chanaka Fernando & Gayan Vidyapathirana & Ruwan Jayathilaka & Sumudu Munasinghe, 2023. "From short to long term: Dynamic analysis of FDI and net export in global regions," PLOS ONE, Public Library of Science, vol. 18(9), pages 1-34, September.
    • Handle: RePEc:plo:pone00:0291301
    DOI: 10.1371/journal.pone.0291301
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0291301
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0291301&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0291301?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Zhang, Qing & Felmingham, Bruce, 2001. "The relationship between inward direct foreign investment and China's provincial export trade," China Economic Review, Elsevier, vol. 12(1), pages 82-99.
    2. Kojima, Kiyoshi, 1982. "Macroeconomic versus International Business Approach to Direct Foreign Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 23(1), pages 1-19, June.
    3. Ranjan Kumar Dash & Chandan Sharma, 2010. "Does causality between FDI and trade exist: evidence from South Asia?," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 3(4), pages 390-413.
    4. Obiora G. Okechukwu & Glauco De Vita & Yun Luo, 2018. "The impact of FDI on Nigeria’s export performance: a sectoral analysis," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(5), pages 1088-1103, October.
    5. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    6. Chathuni Wijesekara & Chamath Tittagalla & Ashinsana Jayathilaka & Uvinya Ilukpotha & Ruwan Jayathilaka & Punmadara Jayasinghe, 2022. "Tourism and economic growth: A global study on Granger causality and wavelet coherence," PLOS ONE, Public Library of Science, vol. 17(9), pages 1-21, September.
    7. Zhang, Kevin Honglin & Markusen, James R., 1999. "Vertical multinationals and host-country characteristics," Journal of Development Economics, Elsevier, vol. 59(2), pages 233-252, August.
    8. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
    9. Teamrat Kahssay Gebremariam & Sun Ying, 2022. "The foreign direct investment-Export performance nexus: An ARDL based empirical evidence from Ethiopia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2009089-200, December.
    10. Shenali Nupehewa & Sachintha Liyanage & Deshan Polkotuwa & Madhurshi Thiyagarajah & Ruwan Jayathilaka & Anuja Lokeshwara, 2022. "More than just investment: Causality analysis between foreign direct investment and economic growth," PLOS ONE, Public Library of Science, vol. 17(11), pages 1-28, November.
    11. Aloui, Chaker & Hkiri, Besma, 2014. "Co-movements of GCC emerging stock markets: New evidence from wavelet coherence analysis," Economic Modelling, Elsevier, vol. 36(C), pages 421-431.
    12. Vacha, Lukas & Barunik, Jozef, 2012. "Co-movement of energy commodities revisited: Evidence from wavelet coherence analysis," Energy Economics, Elsevier, vol. 34(1), pages 241-247.
    13. Pasindu Wannisinghe & Sanjula Jayakody & Sashini Rathnayake & Deshani Wijayasinghe & Ruwan Jayathilaka & Naduni Madhavika, 2023. "Determining the influence of LPI, GCI and IR on FDI: A study on the Asia and Pacific Region," PLOS ONE, Public Library of Science, vol. 18(2), pages 1-12, February.
    14. repec:osf:osfxxx:tehuf_v1 is not listed on IDEAS
    15. Islam, Mohammad Mohidul, 2022. "The dynamics of Foreign Direct Investment (FDI) inflows in developing economies: Evidence from Bangladesh," OSF Preprints tehuf, Center for Open Science.
    16. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    17. Zhang, Kevin Honglin & Song, Shunfeng, 2001. "Promoting exports: the role of inward FDI in China," China Economic Review, Elsevier, vol. 11(4), pages 385-396.
    18. Sayed Farrukh Ahmed & A. K. M. Mohsin & Syed Far Abid Hossain, 2023. "Relationship between FDI Inflows and Export Performance: An Empirical Investigation by Considering Structural Breaks," Economies, MDPI, vol. 11(3), pages 1-17, February.
    19. Mohammad Ajmal Hameed & Mohammad Mafizur Rahman & Rasheda Khanam, 2022. "Assessing the asymmetric war-growth nexus: A case of Afghanistan," PLOS ONE, Public Library of Science, vol. 17(8), pages 1-24, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sandunima Kaluarachchi & Ruwan Jayathilaka, 2024. "Unveiling Sri Lanka’s brain drain and labour market pressure: A study of macroeconomic factors on migration," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-23, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Radovan Kastratović, 2020. "The impact of foreign direct investment on host country exports: A meta‐analysis," The World Economy, Wiley Blackwell, vol. 43(12), pages 3142-3183, December.
    2. Yongrong Xin & Aftab Hussain Tabasam & Zhenling Chen & Aysha Zamir & Carlos Samuel Ramos-Meza, 2024. "Analyzing the Impact of Foreign Direct Investment, Energy Consumption on Services Exports, and Growth of the Services Sector: Evidence from SAARC Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 5709-5728, June.
    3. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.
    4. Dierk Herzer & Philipp Hühne & Peter Nunnenkamp, 2014. "FDI and Income Inequality—Evidence from Latin American Economies," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 778-793, November.
    5. Miet Maertens & Liesbeth Colen & Johan F. M. Swinnen, 2011. "Globalisation and poverty in Senegal: a worst case scenario?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 38(1), pages 31-54, March.
    6. Laura DIACONU & Andrei MAXIM, 2019. "Is human capital a major determinant for foreign investors? Comparative study between India and Romania," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11(2), pages 157-169, July.
    7. Shima’a Hanafy, 2014. "Determinants of FDI Location in Egypt: Empirical Analysis Using Governorate Panel Data," Working Papers 875, Economic Research Forum, revised Nov 2014.
    8. Muhammad Azmat Hayat & Huma Ghulam & Maryam Batool & Muhammad Zahid Naeem & Abdullah Ejaz & Cristi Spulbar & Ramona Birau, 2021. "Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach," JRFM, MDPI, vol. 14(6), pages 1-22, June.
    9. Hardik A. Marfatia, 2017. "A fresh look at integration of risks in the international stock markets: A wavelet approach," Review of Financial Economics, John Wiley & Sons, vol. 34(1), pages 33-49, September.
    10. NPG Samantha & Liu Haiyun, 2018. "Does Inward Foreign Direct Investment Promote Export? Empirical Evidence from Sri Lanka," Business and Economic Research, Macrothink Institute, vol. 8(3), pages 1-18, September.
    11. Rahim, Adam Mohamed & Masih, Mansur, 2016. "Portfolio diversification benefits of Islamic investors with their major trading partners: Evidence from Malaysia based on MGARCH-DCC and wavelet approaches," Economic Modelling, Elsevier, vol. 54(C), pages 425-438.
    12. Gu, Weishi & Awokuse, Titus O. & Yuan, Yan, 2008. "The Contribution of Foreign Direct Investment to China's Export Performance: Evidence from Disaggregated Sectors," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6453, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Burcu ŞENALP, 2018. "Foreign Direct Investment, Economic Growth and Economic Freedom: A Literature Survey," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 68(2), pages 301-336, December.
    14. Lee, Hyun-Hoon & Park, Donghyun & Wang, Jing, 2013. "Different types of firms, different types of products, and their dynamics: An anatomy of China's imports," China Economic Review, Elsevier, vol. 25(C), pages 62-77.
    15. Ijaz Younis & Cheng Longsheng & Muhammad Farhan Basheer & Ahmed Shafique Joyo, 2020. "Stock market comovements among Asian emerging economies: A wavelet-based approach," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-23, October.
    16. Justin Paul, 2016. "The Rise of China: What, When, Where, and Why?," The International Trade Journal, Taylor & Francis Journals, vol. 30(3), pages 207-222, May.
    17. Leone, Fabrizio, 2021. "Foreign Ownership and Robot Adoption," CEPREMAP Working Papers (Docweb) 2111, CEPREMAP.
    18. Yang, Lu & Hamori, Shigeyuki, 2015. "Interdependence between the bond markets of CEEC-3 and Germany: A wavelet coherence analysis," The North American Journal of Economics and Finance, Elsevier, vol. 32(C), pages 124-138.
    19. Wang, Hao & Fidrmuc, Jan & Tian, Yunhua, 2020. "Growing against the background of colonization? Chinese labor market and FDI in a historical perspective," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 1018-1031.
    20. Yang, Lu & Cai, Xiao Jing & Hamori, Shigeyuki, 2017. "Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently? A wavelet coherence analysis," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 536-547.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0291301. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.