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The Causal Relationship between Trade and FDI: Implication for India and East Asian Countries

Author

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  • Cho , Choong Jae

    (Korea Institute for International Economic Policy)

Abstract

This study tries to find the causal relationship between bilateral trade and FDI in India and East Asian countries using macroeconomic data and derive policy implications for regional integration. Since the late 2000s, Korea, Japan and Singapore’s trade and FDI with India have been rapidly increasing, but the causal relationship between trade and FDI could not be found, contrary to expectations. The relationship between trade and FDI in the US, the UK and Germany with India showed one-way or two-way causality, respectively. The estimation suggests that the causal relationship between trade and FDI in both countries could be formed by long-term economic exchange rather than a short-term surge in scale.

Suggested Citation

  • Cho , Choong Jae, 2013. "The Causal Relationship between Trade and FDI: Implication for India and East Asian Countries," Working Papers 13-6, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepwp:2013_006
    DOI: 10.2139/ssrn.2366195
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    Cited by:

    1. Ilham Karimov Mehman & Vaqif Nesirov Elcin & Calal Zeynalli Elay, 2023. "The Examination of the Relationship Between Foreign Direct Investment and Trade in Turkey: ARDL Approach," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(4), pages 117-144, December.
    2. L.G. Burange & Pooja Thakur & Hemangi K. Kelkar, 2017. "Foreign Direct Investment and Intra-industry Trade in India’s Manufacturing Sector," Foreign Trade Review, , vol. 52(4), pages 203-218, November.
    3. Shinta R. I. Soekro & Triono Widodo, 2015. "Mapping And Determinants Of Intra-Asean Foreign Direct Investment (FDI): Indonesia Case Study," Working Papers WP/12/2015, Bank Indonesia.

    More about this item

    Keywords

    Trade; FDI; Causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F19 - International Economics - - Trade - - - Other
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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