Export and FDI in Asian Countries: panel causality analysis

Keywords: Panel Unit Root , Panel Cointegration , Granger Causality , Foreign Direct Investment (FDI) , MENA region countries


  • Abbas Rezazadeh Karsalari, Affiliation: Department of Management, Islamic Azad University, Tafresh, Iran;
  • Mohsen Mehrara, Affiliation: Faculty of Economics, University of Tehran, Tehran, Iran;
  • Maysam Musai, Affiliation: Faculty of Social Sciences, University of Tehran.
Pages:  60 : 66

The FDI of Multinaţional Companies (MNCs) can be export-oriented or market-oriented, intended to capture the internaţional or local markets respectivei}'. Since the MNCs have better export performance than local firms, in case of export-oriented FDI, this would lead local firms to inimic foreign firms in the same way. On the other hand, the reverse causality running from exports to FDI can also exist. It is argued that FDI is attracted to countries with a higher trade potenţial both in terms of imports and exports. This paper investigates the causal reiationship between Foreign Direct Investment (FDI) and exports in 40 Asian countries by using pane! unit root tests and pane! cointegration analysis for the period 1970-2010. The results show a strong causality from exports to FDI in these countries. Moreover, FDI does have significant effects on export in short- and long-run. So, the findings imply bidirecţional causality between foreign direct investment and export in these countries.

JEL classification:  F39, O40