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A Panel Analysis of the FDI Impact on International Trade

  • Manuela Magalhães

    ()

    (NIPE - Research Unit in Economic Policies)

  • Ana Paula Africano

    ()

    (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto)

This paper examines the relationship between Foreign Direct Investment (FDI) and international trade. Specifically, the relationship between the stocks of inward FDI and outward FDI, and Imports and Exports in the Portuguese economy. This paper also studies some technical problems associated with panel data, which have frequently been ignored in previous studies. The problems of serial and contemporaneous correlation have not been taken into account by a panel approach and, as we know, they can have an impact on estimates and statistical inferences. The results show that there exists a complementary relationship between trade and inward stock of FDI and also a country-specific effect on the corrected panel data of heteroscedasticity and correlation.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/07.01.08_WP235_magalhaesafricano.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 235.

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Length: 17 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:por:fepwps:235
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  1. Peter Egger & Michael Pfaffermayr, 2004. "Foreign Direct Investment and European Integration in the 1990s," The World Economy, Wiley Blackwell, vol. 27(1), pages 99-110, 01.
  2. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
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  4. Magnus Blomstrom & Ari Kokko, 1994. "Home Country Effects of Foreign Direct Investment: Evidence from Sweden," NBER Working Papers 4639, National Bureau of Economic Research, Inc.
  5. Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-22, February.
  6. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  7. Brenton, Paul & DiMauro, Francesca & Lücke, Matthias, 1998. "Economic integration and FDI: an empirical analysis of foreign investment in the EU and in Central and Eastern Europe," Kiel Working Papers 890, Kiel Institute for the World Economy.
  8. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
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  10. Dunning, John H, 1979. "Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 269-95, November.
  11. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
  12. James R. Markusen & Anthony J. Venables, 1996. "The Theory of Endowment, Intra-Industry, and Multinational Trade," NBER Working Papers 5529, National Bureau of Economic Research, Inc.
  13. Ana Paula Africano & Manuela Magalhaes, 2005. "FDI and Trade in Portugal: a gravity analysis," FEP Working Papers 174, Universidade do Porto, Faculdade de Economia do Porto.
  14. Isabelle Soubaya & Jean-Louis Mucchielli & Séverine Chédor, 2000. "Investissements directs à l'étranger des multinationales françaises et relations commerciales avec leurs filiales. Une analyse sur données individuelles d'entreprises," Revue Économique, Programme National Persée, vol. 51(3), pages 747-760.
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  17. repec:cai:recosp:reco_p2000_51n3_0747 is not listed on IDEAS
  18. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
  19. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
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  22. Clausing, Kimberly A, 2000. "Does Multinational Activity Displace Trade?," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 190-205, April.
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