Main Article Content

Universiti Utara Malaysia
Vol 23 No 4 (2014), Articles
Submitted: 23-09-2015 Accepted: 23-09-2015 Published: 23-09-2015
Copyright How to Cite


The objectives of the paper are to study foreign trade and investment dimensions of ASEAN and to study the role of FDI to the growth of exports. Vector autoregression model (VAR) is adopted to estimate the long run causal relationship between exports, foreign direct investment and GDP. The cointegration test result shows that there exists a long run equilibrium relationship between exports, FDI and GDP. It is found from the estimated Error Correction Model that FDI is a significant variable and the result indicates that 1 unit increase in FDI in ASEAN will lead to 1.1 units increase in exports. Wald Test indicates that there is a bilateral relationship between Exports and FDI but unilateral relationship between FDI and GDP and the direction is from FDI to GDP which means that FDI causes GDP.



Cited by

Article Details


Aliber, R Z.1970. A Theory of Foreign Direct Investment. In C P Kindleberger (Ed.) The International Corporation: Cambridge, 17-34.

Andraz, Jorge M and Paulo M Rodrigues. (2001). What causes economic growth in Protugal: exports or inwards FDI. Journal of Economic Studies. 37(3). 267,287.

Baja-Rubio Oscar;& Sosvilla-Rivero, Simon. 2002. On the Determinants of Foreign Direct Investment to Developing countries: Is Africa Different. World Development, 30(1),107-119

Baltagi, Badi H.(1995). Econometric analysis of panel data. John Wiley & sons, New York.

Barry, F and J Bradley (1997). FDI and trade: The Irish host country experience. Economic Journal. 107(445), 1798-1811.

Bhagawati, J N.(1973). The Theory of immiserizing growth: further application. In Michael B. Connolly and Alexander K.Swoboda (ed) International trade and money, Toronto, University of Toronto Press.

Bhatt, P.R .2000. Foreign Direct Investment in ASEAN Economies, Prajnan, 29(2) : 127-42

Bhatt P R .(2008a). Determinants of foreign direct investment in ASEAN. Foreign Trade Review, XLIII(3), October-December.

Bhatt P R . (2008b). Trade competitiveness and exchange rate policy in ASEAN. Anveshak, 38(2), July-December.

Bhatt, P R. (2008c). India’s trade competitiveness and exchange rate policy. Margin, 2(3), JulySeptember. Billington, Nicholas .1999. The location of foreign direct investment: an empirical analysis Applied Economics, 31: 65-76.

Blomstrom, M and Persson, H. (1983). Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from Mexican manufacturing industry. World development, 11(6), 493-501.

Campos, Nauro F; & Kinoshita, Yuko .2003. Why does FDI go where it goes? New evidence from the Transition Economics Working Paper, IMF ,WP/83/228

Dritsaki, Melina, Chaido Dritsaki and Antonios Adamopoulos.(2004). American Journal of Applied Sciences.1(3), 230-235

Dollar,D. (1992). Outward-oriented developing economies really do grow more rapidly: evidence from 95 LDCs, 1976-1985. Economic Development and Cultural Change, 40, pp 523-544.

Dunning, J H. (1977). The determinant of international production. Oxford Economic Papers, 25(3), 289-330.

Dunning, J H. (1981). Explaining international direct investment position of countries: towards a dynamic and development approach. Weltwirtschaftliches Archiv.117, 30-64

Dunning , J.H. 1988. Explaining International production .London: Harper Collins.

Dunning , J.H.1988. The eclectic paradigm of international production: A restatement & some possible extensions. Journal of International Business Studies, 30, 1-31.

Dunning , J.H. 1993. Multinational Enterprises & Global Economy. New York: Addison Wesley.

Dunning , J.H. 2001. The Eclectic (OLI) paradigm of International Production: Past, present & Future. International Journal of Economics & Business, 8(2), 173-90.

Dunning , J.H. and Rajneesh Narula. (1996). The investment path revisited: some emerging Issues. In J H Dunnings and Rajneesh Narula. Eds. Foreign direct investment and governments. London: Routledge, 1-41

Ekanayake, E.M., Vogel, R. and Veeramacheneni, B.(2003). Openness and Economic Growth: Empirical Evidence on the Relationship between Output, Inward FDI and Trade. Journal of Business Strategies, 20, 59-72.

Erdal, Fuat; & Tatoglu, Ekrem. (2002). Locational Determinants of Foreign Direct Investment in and Emerging Market Economy: Evidence from Turkey. Multinational Business Review, spring.

Ferris, Stephen P G; Thompson Rodney; & Valsan Calin. 1994. “Foreign Direct Investment in an Emerging Market Economy. Eastern European Economics, July-August.

Girma, S, R. Kneller and M. Pisu. (2007). Do exporters have anything to learn from foreign nationals. European Economic Review, 51 (4), pp.993-1010

Gujarati, D N. (2003). Basic Econometrics, 4th edition, McGraw-Hill, Singapore

Hjalmarsson, Erik and Par Osterholm (2007). Testing for cointegration using the Johansen methodology when variables are near-integrated. IMF Working Paper.

Harrison, A.(1996). Openness and growth: a time series, cross-country analysis for developing countries. Journal of Development Economies, 48, pp419-47

Hejazi, W. and Safarian, A.E.(2001).The Complementarity between U.S. Foreign Direct Investment Stock and Trade. Atlantic Economic Journal, 29, 420-437.

Helleiner, G K (1973). Manufactured exports from less developed countries and multinational firms. Economic Journal, 83, 21-47.

IMF. International Financial Statistics, Annual. various issues.

Janicki, Hubert P; & Wunnava Phanindra V. 2004. Determinants of Foreign Direct Investment : Empirical Evidence from EU accession candidates Applied Economics 36: 505-509.

Kaldor, N (1967).Strategic Factors in Economic Development (Ithaca, NY: New York State School of Industrial and Labour Relations).

Kravis , I B; & Lipsey, R. 1982 Locations of Overseas Production & Production for Exports by US manufacturing firms. Journal of International Economics, 12, 201-23.

Krueger, A O. (1985). The experience and lessons of Asia super exporters. In Corbo, V, A O Krueger and F Ossa (eds). Export-oriented development strategies: The success of five newly industrialized countries, London: Westview Press, pp 197-201

Leichenko, Robin M and Rodney A Ecickson. (1997). Foreign Direct Investment ans state export performance. Journal of Regional Science.37(2), 307-329.

Lin, A.L.(1995). Trade Effects of Foreign Direct Investment: Evidence for Taiwan with Four ASEAN Countries. Weltwirtschafliches Archiv, 131, 737-747.

Liu, X.H. and Shu, C.(2003). Determinants of Export Performance: Evidence from Chinese Industries. Economics of Planning, 36, 45-67.

Liu, X., Wang, C.G. and Wei, Y.Q.(2001). Causal Links between Foreign Direct Investment and Trade in China. China Economic Review, 12, 190-202.

Markusen, J.R; & Venables, A.J. Theory of endowment, intra-industry & multinational trade. NBER Working paper 5529.

Motta, M. 1992. Multinational Firms & the Tariff-jumping Argument. European Economic Review 36, 1557-71

Mundell, Robert A. 1957. International Trade & Factor Mobility. American Economic Review, 47, 321-35.

Noorbakhsh, F; Paloni, A; & Yousef, A. 2001. Human Capital & FDI Inflows to Developing Countries: New Empirical Evidence. World Development , 29 ( 9): 1593-610

Resmini, Laura. 2000. The Determinants of Foreign Direct Investment in CEECS: New evidence from electoral patterns. Economics of Transition, 8( 3): 665-689.

Ricardo, David. ( 1971). The principles of political economy and taxation. J Murray, London. Originally published in 1817.

Sun, H.(2001). Foreign Direct Investment and Regional Export Performance in China. Journal of Regional Science, 41, pp.317-336.

Thornton, J. (1996). Cointegration, causality and export-led growth in Maxico, 1895-1992. Economic Letters. 50(3), 413-6

Vernon, R. (1966). International Investment and International Trade in the Product Cycle. Quarterly Journal of Economics, 80: 190-207.

Veugelers, R. 1991. Locational Determinants and Ranking of Host Countries: An empirical assessment, Kyklos, 44, 363-82

Wheeler, David; & Mody, Ashoka.1992. International Investment Location Decision: The Case of US Firms. Journal of International Economics, 33, 57-56.

World Economic Forum. (2010). The Report of Global Competitiveness, 2010-11.

Xing, Y.(2006). Why is China so attractive to FDI? The role of exchange rates. China Economic Review, 17(2), pp.198-209

Xuan, Nguyen Thanh and Yuqing Xing. ( 2008). Foreign Direct Investment and Exports: The experience of Vietnam. Economics of Transition, 16(2), pp.183-197

Yang, Jeannie Yih Yun; Groenewold, Nicolaas; & Tcha, Moonjoong. 2000. The Determinants of Foreign Direct Investment in Australia. The Economic Record, 76(232).

Zhang, Q. and Felmingham, B.(2001).The Relationship between Inward Foreign Direct Investment and China's Provincial Export Trade.