Does Outward FDI Matter in International Trade? Evidence from Malaysia
Developing and transition economies are an increasingly important source of outward foreign direct investment (OFDI). The objective of this paper is to fill the gap in the literature regarding outward foreign direct investment by adopting the well known gravity model to examine the relationship between trade (export and import), inward and outward FDI using Malaysia as a case. This contributes to the literature as previous studies on OFDI in Malaysia have focused primarily on the determinants of these outward flows, and there are no studies examining the impact of OFDI on trade. Our findings reveal that inward foreign direct investment (IFDI) conforms to the observed pattern of a complementary relationship between FDI and trade while OFDI and trade linkages are not significant. The empirical results also indicate that Malaysia has yet to follow the trajectory of developed economies in its shift from being a net capital importer to a capital exporter due to the lack of trade linkages between OFDI and trade. This further implies that the country may not be able to reap the potential benefits of OFDI that accrue through efficiency gains from specialization and scale advantages that are generated through trade channels.
|Date of creation:||May 2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:ebl:ecbull:v:6:y:2008:i:28:p:1-11 is not listed on IDEAS
- Blonigen, Bruce A., 2001.
"In search of substitution between foreign production and exports,"
Journal of International Economics,
Elsevier, vol. 53(1), pages 81-104, February.
- Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
- Matthieu Bussière & Bernd Schnatz, 2009. "Evaluating China’s Integration in World Trade with a Gravity Model Based Benchmark," Open Economies Review, Springer, vol. 20(1), pages 85-111, February.
- Koi Nyen Wong, 2010. "Outward FDI and home country economic growth: a Malaysian case," Monash Economics Working Papers 56-10, Monash University, Department of Economics.
- Linda S. Goldberg & Michael W. Klein, 1999.
"International Trade and Factor Mobility: An Empirical Investigation,"
NBER Working Papers
7196, National Bureau of Economic Research, Inc.
- Linda S. Goldberg & Michael W. Klein, 1999. "International trade and factor mobility: an empirical investigation," Staff Reports 81, Federal Reserve Bank of New York.
- Christophe Rault & Robert Sova & Ana Maria Sova, 2008.
"Modeling International Trade Flows between CEEC and OECD Countries,"
CESifo Working Paper Series
2282, CESifo Group Munich.
- Christophe Rault & Robert Sova & Ana Maria Sova, 2009. "Modelling international trade flows between CEEC and OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1547-1554.
- Christophe Rault & Ana Maria Sova & Robert Sova, 2008. "Modeling International Trade Flows Between CEEC and OECD Countries," Post-Print halshs-00202794, HAL.
- Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-293, May.
- James R. Markusen & Anthony J. Venables, 1995.
"Multinational Firms and The New Trade Theory,"
NBER Working Papers
5036, National Bureau of Economic Research, Inc.
- Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-308, May.
- Gene M. Grossman & Elhanan Helpman, 1988.
"Product Development and International Trade,"
NBER Working Papers
2540, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
- Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
- I-Hui Cheng & Howard J. Wall, 2004.
"Controlling for heterogeneity in gravity models of trade and integration,"
1999-010, Federal Reserve Bank of St. Louis.
- I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
- Chin-Hong Puah & Albert Apoi & Jerome Swee-Hui Kueh, 2008. "Outward FDI of Malaysia: An Empirical Examination from Macroeconomic Perspective," Economics Bulletin, AccessEcon, vol. 6(28), pages 1-11.
- Hausman, Jerry A. & Taylor, William E., 1981.
"Panel data and unobservable individual effects,"
Journal of Econometrics,
Elsevier, vol. 16(1), pages 155-155, May.
- Peter Egger, 2005. "Alternative Techniques for Estimation of Cross-Section Gravity Models," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 881-891, November.
- Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-122, February.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
3445092, Harvard University Department of Economics.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
- Clausing, Kimberly A, 2000. "Does Multinational Activity Displace Trade?," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 190-205, April.
- Roger Svensson, 1996. "Effects of overseas production on home country exports: Evidence based on Swedish multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(2), pages 304-329, September.
- Peter Egger, "undated".
"An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials,"
WIFO Working Papers
- Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, 02.
- Ma, Yue & Morikawa, Koichiro & Shone, Ronald, 2000. "A macroeconomic model of direct investment in foreign affiliates of Japanese firms," Japan and the World Economy, Elsevier, vol. 12(4), pages 311-335, December.
- 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.
- Goh, Soo Khoon & Wong, Koi Nyen, 2011. "Malaysia's outward FDI: The effects of market size and government policy," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 497-510, May.
- Ellingsen, Gaute & Likumahuwa, Winfried & Nunnenkamp, Peter, 2006. "Outward FDI by Singapore: a different animal?," Open Access Publications from Kiel Institute for the World Economy 3947, Kiel Institute for the World Economy (IfW).
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39715. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.