Trade linkages of inward and outward FDI: Evidence from Malaysia

Soo Khoon Goh, Koi Wong and Siew Yean Tham

Economic Modelling, 2013, vol. 35, issue C, 224-230

Abstract: 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. Based on Hausman–Taylor estimation method, 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 as OFDI is dominated by the services sector, which generally is non-tradable. However, intra-firm trade in services could be increased through the process of fragmentation or outsourcing.

Keywords: Outward FDI; Trade; Multinationals; Malaysia (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:224-230

DOI: 10.1016/j.econmod.2013.06.035

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