Trade and Investment Relationship in SAARC Countries: A Gravity Model Analysis

Abstract

The recent surge in the volume of world trade and FDI has attracted a debate amongst the researchers and policy makers on the issue of the relationship between these two. I.e. whether FDI enhances trade or contracts trade? Our current study tries to find out the answer of this question in case of SAARC group of countries. This study applies gravity model for the analysis. The study covered the time period from 2000 to 2012. The study finds both complementary and supplementary relationship exists between these two variables in the SAARC region.