Causal links between foreign direct investment and trade in China

Liu, Xiaohui; Wang, Chengang; Wei, Yingqi

doi:10.1016/s1043-951x(01)00050-5

Cited by 193 publications

(123 citation statements)

References 27 publications

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“…This increases the investor's base and participation and leads to more capital flows. Liu et al (2001) find that FDI promotes the manufactured exports of recipient countries, while Athukorala and Chand (2000) provide some evidence that the growth enhancing effect of FDI would be significant and strong in countries with open trade policies and better trade regimes with export promoting FDI. While many developing countries are competing for FDI inflow, recent studies attempt to identify conditions, which would lead to more beneficial utilisation of FDI Fernandez-Arias, 2000a, 2000b).…”

Section: Introductionmentioning

confidence: 99%

An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)

Saibu

2012

AJESD

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Section: Introductionmentioning

confidence: 99%

An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)

Saibu

2012

AJESD

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“…The causal linkages suggest the direction running from FDI inflows to exports. It is clear that expansion of exports can results from FDI, if there are relatively large differences in resource endowments between the home countries and host country (Liu et al, 2001). The positive association between these two variables is an evidence of a beneficial impact of FDI on exports.…”

Section: Resultsmentioning

confidence: 99%

Causal Links between Foreign Direct Investment and Exports: Evidence from Malaysia

Samsu¹,

Derus²,

Ooi³

et al. 2009

IJBM

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Malaysia has encouraged foreign investment not only for its role in technology transfer but also for its contribution to Malaysian exports. Therefore, the aim of this study is to investigate empirically the causal relationship between FDI inflows and exports in Malaysia. The methodologies of stationarity of time series and the multivariate Granger concept of causality were employed to carry out the investigation. The finding that time series variables are cointegrated implies that there is a long term relationship between them. The results appear to support the effectiveness of the outward looking orientation policy deployed in this country.Keywords: Foreign direct investment, Export, Causality, Cointegration, Malaysia IntroductionThe present study chooses to fill the gap by investigating the issue with annual data for the sample period of 1970-2003. This paper intends to carry out an econometric analysis to investigate interlinkages between the two variables. Although FDI has been the primary mechanism linking countries' economies, the issues of what FDI means for trade are of particular interest in the context of policies for trade and FDI. Therefore, the motivation of this current study is to empirically investigate the causal relationship between export and FDI inflows by means of the Granger causality test in the cointegration and error correction model framework for annual data from 1970 to 2003.In the case of Malaysia, the government opted for more liberal policies favoring the private sector especially foreign direct investment participation. Responding to this swift change of policies, the domestic private sector has received an Vol. 3, No. 12 International Journal of Business and Management 178aggressive inflow of FDI to ensure the sustained expansion in output growth. Moreover, since its adoption of the policy adjustment and liberalization in the mid 1980s, Malaysia's external trade has expanded at even higher rates. Hence, Malaysia had become one of the fastest growing economies before the financial crisis of 1997. Since FDI and trade are important for growth and development, it is important to understand the interlinkages between the two.The positive relationship between FDI inflows and exports in relation to economic performance has been broadly accepted; however, the empirical work on the relationship is relatively limited. Survey and empirical results are always uncertain, which necessitates a formal testing. Most of the existing research stresses complementarity and substitutability relationships between exports and FDI. However, many of these studies do not discuss the issue of causality between inflows of FDI and exports. The existing literature on the Malaysian position in relation to this subject matter proves to be inadequate.The rest of the paper is organized as follows. In section two, gives a brief discussion about the data set used and outlines the methodology employed. Section three, consisted of discussion and empirical results, concluding remarks with main finding and policy ...

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“…Apart from the real exchange rate, domestic market size affects the foreign direct investment positively (Cuyvers et al, 2011;Liu, Wang, & Wei, 2001). However, the sign changes when the cost of transportation of goods or services to foreign markets exceeds the average cost of production within the markets, so that the market size is hypothesized having a negative impact on FDI inflows of receipt countries and it may strain the direct foreign effect.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Market size is defined in this study as the attractiveness of market with proxy by the GDP per capital, which means markets in host country whose consumers are wealthy magnetize the FDI. The trade openness influences the direct foreign investment in their positive or negative direction (Cuyvers et al, 2011;Gupta & Singh, 2016;Iamsiraroj, 2016;Liu et al, 2001;Seetanah & Rojid, 2011;Severiano, 2011). The country's openness to export, for example, attracts the export-oriented foreign direct investment, while an increase in tariffs and other barriers imposed on exporting trades by host country discourages inflows of FDI.…”

Section: Literature Reviewmentioning

confidence: 99%

The Real Exchange Rate-Foreign Direct Investment Controversy in South Africa: An Application of ARDL Approach

Dahir¹,

Mahat²,

Bany‐Ariffin³

et al. 2017

IJEF

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This paper examines the relationship between real exchange rate and foreign direct investment. We apply autoregressive distributed lag (ARDL) bounds testing method to estimate short and long-run relationships between the series in South Africa over the period of 1987-2016. The results reveal long-run cointegration relationships among variables are confirmed, implying real exchange rate, domestic market size stimulate the foreign direct investment in the long run. Furthermore, there is significant Granger unidirectional causality foreign direct investment to real exchange rate in short and long run and from market size to trade openness in a short run. This finding further suggests that the exchange rate instability are likely to be substantially harmful to a positive effect of FDI and should be avoided in South Africa.

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Causal links between foreign direct investment and trade in China

Cited by 193 publications

References 27 publications

An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)

An analysis of causal nexus between foreign direct investment, exchange rate and financial market development in Nigeria (1970 to 2009)

Causal Links between Foreign Direct Investment and Exports: Evidence from Malaysia

The Real Exchange Rate-Foreign Direct Investment Controversy in South Africa: An Application of ARDL Approach

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