Economics at your fingertips  

Panel Causality Relationship among FDI and Trade (Evidence from 16 Advanced Europe Countries)

Farshid Pourshahabi, Ehsan Salimi Soderjani and Davoud Mahmoudinia ()
Additional contact information
Farshid Pourshahabi: Ph.D. Student in Economics, Department of Economics, Sistan and Baluchestan University, Zahedan, Iran. (Corresponding Author)
Ehsan Salimi Soderjani: Ph.D. Student in Economics, Department of Economics, Tehran University, Tehran, Iran.

Iranian Economic Review (IER), 2013, vol. 18, issue 1, 115-133

Abstract: This study applied panel unit root, panel co-integration and panel causality tests to distinguish the position of short run and long run causality among foreign direct investment (FDI) and trade in a panel of 16 advanced European countries over the period 1976-2008, 528 observations were incorporated into the model. The results show that there is bidirectional causality among FDI-Export and FDI-Import in the short run while the long run causality runs from import and export to FDI. Furthermore, there is unidirectional causality from FDI to total trade in the long run and bidirectional causality in the short run. Therefore, increase in FDI led to increase in export and import in the short run and these led to increase in total trade in the short run. Thus, attractive FDI policies in trade oriented economies can be used to promote the level of trade, and expanding trade policies are helpful as well to attract more FDI in these set of countries.

Keywords: FDI; Trade; Panel Causality; Europe (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Iranian Economic Review (IER) is currently edited by Dr.Hossien Abbasinejad

More articles in Iranian Economic Review (IER) from Faculty of Economics,University of Tehran.Tehran,Iran Contact information at EDIRC.
Bibliographic data for series maintained by [z.rahimalipour] ().

Page updated 2023-06-15
Handle: RePEc:eut:journl:v:18:y:2013:i:1:p:115