Trade and foreign direct investment in Latin America and Southeast Asia: temporal causality analysis

This paper examines the relationship between foreign trade and foreign direct investment (FDI) in selected Latin American and Southeast Asian economies in the period 1970 – 94. The hypothesis of complementarity/substitution between FDI and foreign trade is tested using bivariate VECM models and temp...

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Bibliographic Details
Published in:Journal of international development 2000-10, Vol.12 (7), p.903-924
Main Authors: De Mello Jr, Luiz R., Fukasaku, Kiichiro
Format: Article
Language:English
Subjects:
Causality
Copyright
Correlation analysis
Developing countries
Economic development
Economic growth
Economic history
Economic models
Emerging markets
Exports
Foreign direct investment
Foreign exchange rates
Foreign investment
Foreign trade
Host country
Hypotheses
International trade
Latin America
LDCs
Macroeconomics
Multinational corporations
Southeast Asia
Studies
Trade flows
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Summary:This paper examines the relationship between foreign trade and foreign direct investment (FDI) in selected Latin American and Southeast Asian economies in the period 1970 – 94. The hypothesis of complementarity/substitution between FDI and foreign trade is tested using bivariate VECM models and temporal causality analysis. The impact of FDI on the trade balance is also assessed and weak exogeneity tests are performed. It is found that the impact of FDI on the trade balance is stronger in trade‐oriented economies, and that net FDI inflows are more sensitive to changes in exports in Southeast Asian countries, than in their Latin American counterparts, given the export‐orientation of foreign investment in the former region. Copyright © 2000 John Wiley & Sons, Ltd.
ISSN:0954-1748
1099-1328
DOI:10.1002/1099-1328(200010)12:7<903::AID-JID695>3.0.CO;2-8