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FDI and Trade in Portugal: a gravity analysis

  • Ana Paula Africano

    ()

    (CEMPRE, Faculdade de Economia, Universidade do Porto)

  • Manuela Magalhaes

    ()

    (IPCA e Faculdade de Economia, Universidade do Porto)

This study investigates the relation between the stock of foreign direct investment (FDI) and the geographical pattern of trade flows in the Portuguese economy. The gravity model is applied to bilateral trade between Portugal and OECD countries plus Brazil from 1998 to 2000. The stock of inward FDI is positively related to trade suggesting the existence of complementary between the two. This effect is stronger on exports than on imports resulting in a positive impact on trade balance. It is also found that the stock of outward FDI has no significant relation either with Portuguese exports or imports. Finally, FDI helps to explain the above “normal” exports to the EU and the below “normal” imports from Candidate Countries.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/05.04.18_wp174_anapaula.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 174.

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Length: 24 pages.
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:por:fepwps:174
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