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FDI-trade nexus: empirical analysis on ASEAN-5


  • Kueh, Jerome Swee-Hui
  • Puah, Chin-Hong
  • Lau, Evan
  • Abu Mansor, Shazali


This paper investigates the dynamic linkages between FDI and trade of ASEAN-5 countries using the Autoregressive Distributed Lag (ARDL) bounds testing approach. Empirical results suggest that FDI and import are complement to each other in long run but import tends to substitute FDI in short run. Conversely, export tends to substitute FDI in long run, however, complementary linkage was found between FDI and export in short run.

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  • Kueh, Jerome Swee-Hui & Puah, Chin-Hong & Lau, Evan & Abu Mansor, Shazali, 2007. "FDI-trade nexus: empirical analysis on ASEAN-5," MPRA Paper 5220, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:5220

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    References listed on IDEAS

    1. Kojima, Kiyoshi, 1982. "Macroeconomic versus International Business Approach to Direct Foreign Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 23(1), pages 1-19, June.
    2. Horst, Thomas, 1972. "Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 258-266, August.
    3. 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.
    4. Yue, Chia Siow, 1996. "ASEAN strategies on foreign direct investment and prospects for ASEAN-India investments," Journal of Asian Economics, Elsevier, vol. 7(4), pages 701-721.
    5. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
    6. Kojima, Kiyoshi, 1975. "International Trade and Foreign Investment : Substitutes or Complements," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 16(1), pages 1-12, June.
    7. Yingqi Wei & Xiaming Liu & David Parker & Kirit Vaidya, 1999. "The Regional Distribution of Foreign Direct Investment in China," Regional Studies, Taylor & Francis Journals, vol. 33(9), pages 857-867.
    8. Linda S. Goldberg & Michael W. Klein, 1996. "Foreign direct investment, trade, and real exchange rate linkages in developing countries," Proceedings, Federal Reserve Bank of San Francisco, pages 73-100.
    9. Barrell, Ray & Pain, Nigel, 1999. "Domestic institutions, agglomerations and foreign direct investment in Europe," European Economic Review, Elsevier, vol. 43(4-6), pages 925-934, April.
    10. Narayan, Paresh Kumar & Narayan, Seema, 2005. "Estimating income and price elasticities of imports for Fiji in a cointegration framework," Economic Modelling, Elsevier, vol. 22(3), pages 423-438, May.
    11. Pain, Nigel, 1993. "An Econometric Analysis of Foreign Direct Investment in the United Kingdom," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(1), pages 1-23, February.
    12. Barrell, Ray & Pain, Nigel, 1999. "Trade restraints and Japanese direct investment flows," European Economic Review, Elsevier, vol. 43(1), pages 29-45, January.
    13. Lipsey, Robert E & Weiss, Merle Yahr, 1981. "Foreign Production and Exports in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 488-494, November.
    14. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
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    Cited by:

    1. Liew, Siew-Ling, 2016. "Determinants of Foreign Direct Investment," MPRA Paper 70447, University Library of Munich, Germany.
    2. Liew, Siew-Ling, 2016. "Review on Determinants of Capital Flight," MPRA Paper 70445, University Library of Munich, Germany.

    More about this item


    FDI; Trade; Autoregressive Distributed Lag (ARDL);

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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