An empirical study on the long-term correlation between international trade and infl ow of Foreign Direct Investment based on Cointegration Theory: Evidence from China

Bin Qiu (), Baoqing Tang and Shaoqin Sun
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Bin Qiu: School of Economics and Management, Southeast University, Nanjing 210096, China
Baoqing Tang: Jiangsu College of Economics and Trade, Nanjing 210007, China
Shaoqin Sun: School of Economics and Management, Nanjing University of Information Science & Technology, Nanjing 210044, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2007, vol. 2, issue 4, 607-622

Abstract: This paper studies the long-term relationship between FDI and imports and exports through evidence from China by using cointegration technology, and the Granger causality test shows that FDI had an obvious effect on imports and exports activities of foreign firms, and in the meantime, the imports and exports of foreign firms greatly promoted FDI. However, there is not a stable equilibrium between FDI and international trade in the long run for all firms in China. This paper provides some explanations for the possible reasons that cause the above difference in estimation results from the perspectives of both location and industry factors.

Keywords: international trade; FDI; long-term equilibrium; cointegration (search for similar items in EconPapers)
JEL-codes: C82 F21 (search for similar items in EconPapers)
Date: 2007
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