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Outward FDI Effects on the Portuguese Trade Balance 1996-2007

Author

Listed:
  • Miguel Fonseca
  • António Mendonça
  • José Passos

Abstract

Given the increased internationalisation of the Portuguese economy through outward Foreign Direct Investment (FDI), particularly on the Portuguese-speaking countries, our main objective is to discuss the empirical relationship between this outward FDI and trade. We use panel data analysis within a framework of gravity equations for exports and imports, with a sample composed by EU-15, U.S.A., Brazil, Angola, Japan and China, for the period 1996-2007. Our main conclusion is that the empirical evidence for Portugal is consistent with a substitution hypothesis between direct investment abroad and trade, and consequently we detect a negative trade balance effect with the majority of countries in our sample, excepting Angola and, in a lesser extension, Spain.

Suggested Citation

  • Miguel Fonseca & António Mendonça & José Passos, 2009. "Outward FDI Effects on the Portuguese Trade Balance 1996-2007," Working Papers Department of Economics 2009/11, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp112009
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    Keywords

    Foreign Direct Investment; Trade; Gravity Model; Portugal.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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