 Foreign Direct and Portfolio Investment in the Contemporary Globalized World: Should They Be Still Treated Separately?Marcin Humanicki, Robert Kelm () and Krzysztof Olszewski () Central European Journal of Economic Modelling and Econometrics, 2017, vol. 9, issue 2, 115-135 Abstract: Foreign direct investment (FDI) and foreign portfolio investment (FPI) have been long considered as independent forms of international capital flows. This paper analyzes the mutual relationship between FDI and FPI and attempts to answer the question whether they complement or substitute for each other from a foreign investor’s point of view. The paper describes the main characteristics of FDI and FPI in terms of their volatility and profitability. We analyze the long-run and short-run relationships between FDI and FPI using vector error correction (VEC) regressions on data for Poland as it is the largest country in Central and Eastern Europe and receives the lion’s share of these two forms of capital in the region. Our investigation suggests that FDI and FPI may be regarded as substitutes. In economically stable periods FDI tends to dominate over FPI but during insecurity and economic distress FPI starts to gain importance. Keywords: foreign direct investment; foreign portfolio investment; emerging market economies; econometric modeling; cointegration (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:9:y:2017:i:2:p:115-135 Access Statistics for this article More articles in Central European Journal of Economic Modelling and Econometrics from Central European Journal of Economic Modelling and Econometrics |
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