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The causal relationship between domestic and outward foreign investment: evidence for Italy

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  • Dierk Herzer

Abstract

This article examines the impact of outward foreign direct investment (OFDI) on domestic investment by applying cointegration techniques to macroeconomic time series data for Italy. We find that OFDI has negative short-run and positive long-run effects on domestic investment. Furthermore, our empirical results show that the long-run causality is bi-directional, suggesting that increased OFDI is both a cause and a consequence of increased domestic investment.

Suggested Citation

  • Dierk Herzer, 2008. "The causal relationship between domestic and outward foreign investment: evidence for Italy," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(5), pages 307-310.
  • Handle: RePEc:taf:apfelt:v:4:y:2008:i:5:p:307-310
    DOI: 10.1080/17446540701720634
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    1. Martin S. Feldstein, 1995. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Chapters,in: The Effects of Taxation on Multinational Corporations, pages 43-66 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Dierk Herzer & Michael Grimm, 2012. "Does foreign aid increase private investment? Evidence from panel cointegration," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2537-2550, July.

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