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Outward FDI and Domestic Investment

  • Dierk Herzer
  • Mechthild Schrooten

This paper examines the impact of outward foreign direct investment (OFDI) on domestic investment by applying co-integration techniques to macroeconomic time series data for the United Sates and Germany. We show that the two countries differ: In the case of the US, OFDI has positive long-run effects on domestic investment while in the case of Germany the reverse effect is reported.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 679.

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Length: 14 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp679
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  1. René Belderbos, 1992. "Large multinational enterprises based in a small economy: Effects on domestic investment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(3), pages 543-557, September.
  2. Robert E. Lipsey & Guy V.G. Stevens, 1988. "Interactions between Domestic and Foreign Investment," NBER Working Papers 2714, National Bureau of Economic Research, Inc.
  3. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," American Economic Review, American Economic Association, vol. 95(2), pages 33-38, May.
  4. Peter C.B. Phillips & Mico Loretan, 1989. "Estimating Long Run Economic Equilibria," Cowles Foundation Discussion Papers 928, Cowles Foundation for Research in Economics, Yale University.
  5. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  6. Martin Feldstein, 1994. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Working Papers 4668, National Bureau of Economic Research, Inc.
  7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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