Trade and Investment Relationship in SAARC Countries: A Gravity Model Analysis
DOI:
https://doi.org/10.1956/jge.v11i1.373Keywords:
FDI, SAARC, Gravity modelAbstract
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.Â
References
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Anderson, J.E. (1979), “A Theoretical Foundation for the Gravity Equation.†American Economic Review, Vol.63, pp.106-116
An-loh Lin (1995) “Trade Effects of Foreign Direct Investment: Evidence for Taiwan with Four ASEAN Countries†Weltwirtschaftliches Archive, No. 4, pp. 737-747
Bergstrand, J. H., Egger, P., & Larch, M. (2008) “The New Expats: Economic Determinants of Bilateral Expatriate, FDI, and International Trade Flows†Working Paper, Mimeo
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Braconier, H., Norbäck, P. J., & Urban, D. (2005) “Reconciling the Evidence on the Knowledge capital Model†Review of International Economics, 13(4), 770-786.
Brainard S. L (1993) An Empirical Assessment of the proximity- concentration and tradeoffs between Multinational sales and Trade, Working paper No 4580, NBER
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Fontagné L. (1999) “Foreign Direct Investment and International Trade: Complements or Substitutes?†OECD Science, Technology and Industry Working Papers, 1999/03, OECD Publishing
Graham E. (1999) “On the Relationship among Direct Investment and International Trade in the Manufacturing Sector: Empirical Results from the U.S. and Japanâ€, Working Paper, Institute of International Economics, Washington DC
Helpman E., Melitz M. and Yeaple S. (2003), “Export versus FDIâ€, NBER Working Paper No. 9439
Krugman, Paul. (1983) "The 'New Theories' of Inter- national Trade and the Multinational Enterprise," in D. B. Audretsch and Charles Kindleberger, eds., The multinational corporation in the 1980s. Cambridge, MA: MIT Press, pp. 57-7
Sultana I and Shammi Akhter (2013) “Fluctuation of FDI Inflow in Bangladesh-Obstacles and Potentials: An Issue of Policy Failure†Mediterranean Journal of Social Sciences, Vol 4 No 2, Rome
Susan F. Stone and Bang Nam Jeon (2000) “Foreign Direct Investment and Trade in the Asia-Pacific Region: Complementarity, Distance and Regional Economic Integrationâ€, Journal of Economic Integration, Vol. 15, No. 3 pp. 460-485
Tinbergen, J. (1962), “Shaping the world’s economy: Suggestions for and International Economic Policyâ€, The Twentieth Century Fun, New York
UNCTAD (1996) World Investment Report, UNCTAD, Geneva
Vernon, R. (1966) “International Investment and International Trade in the Product Cycleâ€, Quarterly Journal of Economics, Vol. 80, pp 190-207
Anderson, J.E. (1979), “A Theoretical Foundation for the Gravity Equation.†American Economic Review, Vol.63, pp.106-116
An-loh Lin (1995) “Trade Effects of Foreign Direct Investment: Evidence for Taiwan with Four ASEAN Countries†Weltwirtschaftliches Archive, No. 4, pp. 737-747
Bergstrand, J. H., Egger, P., & Larch, M. (2008) “The New Expats: Economic Determinants of Bilateral Expatriate, FDI, and International Trade Flows†Working Paper, Mimeo
Bergstrand, J.H. (1985), “The gravity Equation in International Trade: Some micro-Economics Foundations and Empirical Evidenceâ€, Review of Economic and Statistic, Vol.67, pp.474-481
Board of Investment, (2010), “Foreign Direct Investment in Bangladesh (1971-2010)â€, Prime Minister’s office, Government of Bangladesh
Braconier, H., Norbäck, P. J., & Urban, D. (2005) “Reconciling the Evidence on the Knowledge capital Model†Review of International Economics, 13(4), 770-786.
Brainard S. L (1993) An Empirical Assessment of the proximity- concentration and tradeoffs between Multinational sales and Trade, Working paper No 4580, NBER
Brainard S.L. (1997). “An Empirical Assessment of the Proximity Concentration Trade-off between Multinationals Sales and Tradeâ€, American Economic Review, vol. 8, pp. 520-544
Central Bank of Sri Lanka (2013) Annual Reports, various Issues
Deardorff, A. (1997) "Determinants of Bilateral Trade: Does Gravity Work in a Classical World?" in The Regionalization of the World Economy, ed., Jeffrey Frankel, Chicago, IL: University of Chicago Press.
Department of Industry (2013) Industrial Statistics, Various Issues, Department of Industry, Nepal
DIPP (2013) SIA New Letters, Various Issues, DIPP New Delhi
Fontagné L. (1999) “Foreign Direct Investment and International Trade: Complements or Substitutes?†OECD Science, Technology and Industry Working Papers, 1999/03, OECD Publishing
Graham E. (1999) “On the Relationship among Direct Investment and International Trade in the Manufacturing Sector: Empirical Results from the U.S. and Japanâ€, Working Paper, Institute of International Economics, Washington DC
Helpman E., Melitz M. and Yeaple S. (2003), “Export versus FDIâ€, NBER Working Paper No. 9439
Krugman, Paul. (1983) "The 'New Theories' of Inter- national Trade and the Multinational Enterprise," in D. B. Audretsch and Charles Kindleberger, eds., The multinational corporation in the 1980s. Cambridge, MA: MIT Press, pp. 57-7
Sultana I and Shammi Akhter (2013) “Fluctuation of FDI Inflow in Bangladesh-Obstacles and Potentials: An Issue of Policy Failure†Mediterranean Journal of Social Sciences, Vol 4 No 2, Rome
Susan F. Stone and Bang Nam Jeon (2000) “Foreign Direct Investment and Trade in the Asia-Pacific Region: Complementarity, Distance and Regional Economic Integrationâ€, Journal of Economic Integration, Vol. 15, No. 3 pp. 460-485
Tinbergen, J. (1962), “Shaping the world’s economy: Suggestions for and International Economic Policyâ€, The Twentieth Century Fun, New York
UNCTAD (1996) World Investment Report, UNCTAD, Geneva
Vernon, R. (1966) “International Investment and International Trade in the Product Cycleâ€, Quarterly Journal of Economics, Vol. 80, pp 190-207
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Published
23.03.2015
How to Cite
Choudhury, R. N. and Nayak, D. N. (2015) “Trade and Investment Relationship in SAARC Countries: A Gravity Model Analysis”, Journal of Global Economy, 11(1), pp. 61–78. doi: 10.1956/jge.v11i1.373.
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