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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 57:
FDI and Exports: the case of the High Performing East Asian Economies

Andreas Johnson ()

Abstract: The paper investigates the flows of FDI and trade in eight high performing East Asian economies with a focus on the relationship between FDI and host country exports. The development and importance of FDI and trade for the region is described. The empirical part of the paper examines the relationship between FDI and host country exports, using data for the period 1980 to 2003. Time series regressions for individual economies as well as panel data estimation indicate that FDI inflows have a significant and positive effect on host country exports, suggesting that export-platform FDI may be important for the East Asian economies. No clear link between outflows of FDI and exports was found, allowing FDI outflows to function as both a complement and a substitute for source country exports. Granger causality tests find indications of FDI inflows causing exports, providing further evidence that the export-platform FDI strategy applies for the East Asian economies.

Keywords: foreign direct investment; East Asia; international trade; exports; (follow links to similar papers)

JEL-Codes: F14; F21; F23; (follow links to similar papers)

41 pages, March 29, 2006

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