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Trade and foreign direct investment in Latin America and Southeast Asia: temporal causality analysis

  • Luiz R. De Mello

    (University of Kent at Canterbury, UK)

  • Kiichiro Fukasaku

    (OECD Development Centre, Paris, France)

This paper examines the relationship between foreign trade and foreign direct investment (FDI) in selected Latin American and Southeast Asian economies in the period 1970 - 94. The hypothesis of complementarity|substitution between FDI and foreign trade is tested using bivariate VECM models and temporal causality analysis. The impact of FDI on the trade balance is also assessed and weak exogeneity tests are performed. It is found that the impact of FDI on the trade balance is stronger in trade-oriented economies, and that net FDI inflows are more sensitive to changes in exports in Southeast Asian countries, than in their Latin American counterparts, given the export-orientation of foreign investment in the former region. Copyright © 2000 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 12 (2000)
Issue (Month): 7 ()
Pages: 903-924

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Handle: RePEc:wly:jintdv:v:12:y:2000:i:7:p:903-924
Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/5102/home

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