Foreign Direct Investment and Trade: A Causality Analysis

Oscar Bajo-Rubio () and Maria Montero Mu–oz

No 9902, Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: We analyse in this paper the relationship between outward FDI and exports, with Spanish quarterly data for the period 1977-1992. The empirical methodology makes use of Granger-causality tests in a cointegration framework, where the order of lags for each variable has been selected by means of Hsiao¹s sequential approach. The tests have been performed both in a bivariate and multivariate setting, in the latter case including as additional variables a proxy for world income and the relative price of exports. Since cointegration between outward FDI and exports was found, error-correction mechanisms under three alternative specifications were included, which allowed us to discriminate between short- and long-run Granger-causality. Our results point to the existence of long-run Granger-causality from outward FDI to exports, according to a complementary relationship, for the Spanish case during the period of analysis.

Keywords: Foreign direct investment; exports; Granger-causality (search for similar items in EconPapers)
JEL-codes: F21 F40 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1999
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Foreign Direct Investment and Trade: A Causality Analysis (2001)
Working Paper: Foreign direct investment and trade: A causality analysis
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Persistent link: https://EconPapers.repec.org/RePEc:nav:ecupna:9902

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