FDI Inflows and Trade Imbalances: Evidence from Developing Asia
The present paper examines the effects of FDI inflows on external imbalances in the developing and transition countries in Asia during the period 1991-2011. To this end, we extend the conventional trade balance model by reformulating the determinants of exports and imports. Our empirical findings su...
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Università Carlo Cattaneo LIUC
2014-06-01
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Online Access: | http://eaces.liuc.it/18242979201401/182429792014110106.pdf |
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doaj-e3ed46ae6c394210a3ff9a8c8828f1812020-11-25T01:29:18ZengUniversità Carlo Cattaneo LIUCThe European Journal of Comparative Economics1824-29792014-06-01111147169FDI Inflows and Trade Imbalances: Evidence from Developing AsiaThi Anh-Dao TranThi Thanh Binh DinhThe present paper examines the effects of FDI inflows on external imbalances in the developing and transition countries in Asia during the period 1991-2011. To this end, we extend the conventional trade balance model by reformulating the determinants of exports and imports. Our empirical findings suggest that current FDI inflows increase trade deficits, leading to negative consequences for the host country’s macroeconomic stability. However, the coefficient estimated becomes negative when we lag the FDI variable, implying that FDI inflows worsen the trade balance first and then improve it. We also find that a real depreciation tends to worsen trade balances because the usual Marshall-Lerner constraint is magnified by the import content of exports. Lastly, higher domestic absorption and larger productive capacity in the manufacturing sector improve the trade balance. Thelatter result supports the export-investment nexus, one of the most distinctive features of Asia.http://eaces.liuc.it/18242979201401/182429792014110106.pdfFDIexport-led growthtrade imbalancedeveloping Asia |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Thi Anh-Dao Tran Thi Thanh Binh Dinh |
spellingShingle |
Thi Anh-Dao Tran Thi Thanh Binh Dinh FDI Inflows and Trade Imbalances: Evidence from Developing Asia The European Journal of Comparative Economics FDI export-led growth trade imbalance developing Asia |
author_facet |
Thi Anh-Dao Tran Thi Thanh Binh Dinh |
author_sort |
Thi Anh-Dao Tran |
title |
FDI Inflows and Trade Imbalances: Evidence from Developing Asia |
title_short |
FDI Inflows and Trade Imbalances: Evidence from Developing Asia |
title_full |
FDI Inflows and Trade Imbalances: Evidence from Developing Asia |
title_fullStr |
FDI Inflows and Trade Imbalances: Evidence from Developing Asia |
title_full_unstemmed |
FDI Inflows and Trade Imbalances: Evidence from Developing Asia |
title_sort |
fdi inflows and trade imbalances: evidence from developing asia |
publisher |
Università Carlo Cattaneo LIUC |
series |
The European Journal of Comparative Economics |
issn |
1824-2979 |
publishDate |
2014-06-01 |
description |
The present paper examines the effects of FDI inflows on external imbalances in the developing and transition countries in Asia during the period 1991-2011. To this end, we extend the conventional trade balance model by reformulating the determinants of exports and imports. Our empirical findings suggest that current FDI inflows increase trade deficits, leading to negative consequences for the host country’s macroeconomic stability. However, the coefficient estimated becomes negative when we lag the FDI variable, implying that FDI inflows worsen the trade balance first and then improve it. We also find that a real depreciation tends to worsen trade balances because the usual Marshall-Lerner constraint is magnified by the import content of exports. Lastly, higher domestic absorption and larger productive capacity in the manufacturing sector improve the trade balance. Thelatter result supports the export-investment nexus, one of the most distinctive features of Asia. |
topic |
FDI export-led growth trade imbalance developing Asia |
url |
http://eaces.liuc.it/18242979201401/182429792014110106.pdf |
work_keys_str_mv |
AT thianhdaotran fdiinflowsandtradeimbalancesevidencefromdevelopingasia AT thithanhbinhdinh fdiinflowsandtradeimbalancesevidencefromdevelopingasia |
_version_ |
1725097140868349952 |