Original scientific paper
https://doi.org/10.18045/zbefri.2016.1.63
Trade and foreign direct investment: Evidence from South East European countries and new European Union member states
Bardhyl Dauti
orcid.org/0000-0001-8372-9443
; Faculty of Economics, University of Tetovo, Tetovo, Macedonia
Abstract
The goal of this research is to provide an empirical assessment of the
complementarity or substituting relationship between Trade and FDI in a link to
country characteristics, using bilateral level data between FDI and trade for the
period 1994 – 2010. In the research, an augmented gravity model has been used to
test the relationship between Trade (both export and import), FDI stock and
country characteristics between OECD-20 countries and SEE-5 and EU-NMS-10
countries. The empirical model considers how the relationship between FDI and
Trade determine whether type of FDI into SEE-5 and EU-NMS-10 from core
OECD-20 countries, is vertical or horizontal. With regard to the relationship
between exports and FDI, the findings of the research showed mixed evidence, thus
supporting vertical FDI for EU-NMS-10 countries, and horizontal FDI for SEE-5
countries. On the other hand, based on the relationship between imports and FDI,
the results of the research supported vertical FDI for both EU-NMS-10 and SEE-5
group of countries. The basic conclusion is that the research provides an empirical
evidence on the mixed nature of FDI into the host SEE-5 and EU-NMS-10
countries, supporting both complementary and substituting relationship between
trade and FDI in the host countries.
Keywords
Foreign direct investment; trade; complements; substitutes; gravity model
Hrčak ID:
160737
URI
Publication date:
27.6.2016.
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