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Is Japanese FDI a Substitute for or a Complement to Trade in Asia?

  • Jin Inhwan
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    This paper analyzes the effects of Japanese FDI on international trade in manufacturing industries during the period 1989-2004. The panel regressions are conducted for the net export of the six selected Asian countries at a sectoral level. The econometric analysis reveals some FDI tends to simulate bilateral trade, while other FDI has a tendency to reduce the volume of bilateral trade. The analysis also reveals that FDI into non-manufacturing sectors and all other manufacturing sectors has spillover effects on trade of manufactured goods in some countries and manufacturing industries. The relationship between capital movement and bilateral trade is not one consistent pattern of substitutability or complementarity but differs across manufacturing sectors and countries in Asia.

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    File URL: http://hdl.handle.net/10097/55389
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    File URL: http://ir.library.tohoku.ac.jp/re/bitstream/10097/55389/1/terg236.pdf
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    Paper provided by Graduate School of Economics and Management, Tohoku University in its series TERG Discussion Papers with number 236.

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    Length: 28 pages
    Date of creation: Aug 2008
    Date of revision: Oct 2008
    Handle: RePEc:toh:tergaa:236
    Contact details of provider: Postal: Kawauchi, Aoba-ku, Sendai 980-8476
    Web page: http://www.econ.tohoku.ac.jp/econ/english/index.html
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    1. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
    2. Purvis, Douglas D, 1972. "Technology, Trade and Factor Mobility," Economic Journal, Royal Economic Society, vol. 82(327), pages 991-99, September.
    3. Wong, Kar-yiu, 1986. "Are international trade and factor mobility substitutes?," Journal of International Economics, Elsevier, vol. 21(1-2), pages 25-43, August.
    4. Collins, William J & O'Rourke, Kevin Hjortshøj & Williamson, Jeffrey G, 1997. "Were Trade and Factor Mobility Substitutes in History?," CEPR Discussion Papers 1661, C.E.P.R. Discussion Papers.
    5. 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 488-94, November.
    6. Riddell, W Craig, 1981. "Contemporaneous Correlation in Wage Contract Studies," Econometrica, Econometric Society, vol. 49(2), pages 515-16, March.
    7. Kloek, T, 1981. "OLS Estimation in a Model Where a Microvariable Is Explained by Aggregates and Contemporaneous Disturbances Are Equicorrelated," Econometrica, Econometric Society, vol. 49(1), pages 205-07, January.
    8. Roger Svensson, 1996. "Effects of overseas production on home country exports: Evidence based on Swedish multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(2), pages 304-329, September.
    9. Ken Miyajima, 2005. "Real Exchange Rates in Growing Economies; How Strong is the Role of the Nontradables Sector?," IMF Working Papers 05/233, International Monetary Fund.
    10. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    11. Belderbos, Rene & Sleuwaegen, Leo, 1998. "Tariff jumping DFI and export substitution: Japanese electronics firms in Europe," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 601-638, September.
    12. 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 304-08, May.
    13. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
    14. Magnus Blomstrom & Robert E. Lipsey & Ksenia Kulchycky, 1988. "U.S. and Swedish Direct Investment and Exports," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 257-302 National Bureau of Economic Research, Inc.
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