Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Does foreign direct investment promote exports in China?

Does foreign direct investment promote exports in China? PurposeThe purpose of this paper is to investigate the causal link between foreign direct investment (FDI) and exports in China based on the knowledge capital model (KK model, Markusen, 2002).Design/methodology/approachThe bootstrap Granger full-sample and sub-sample rolling window causality test is used to determine whether FDI can promote exports.FindingsThe full-sample causality test indicates no causal relationship from FDI to exports. However, considering structural changes of exports and FDI, the authors’ find that the full-sample test is not reliable. Instead, the authors use the rolling window causality test to revisit the dynamic causal relationship, and the results present significant effects from FDI on exports, mostly around periods in which the proportion of FDI from Hong Kong, Macao and Taiwan is increasing. Specifically, positive impacts of FDI on exports are stronger than the negative impacts in China.Research limitations/implicationsThe findings in this study suggest a significant time-varying nature of the correlation between FDI and exports. The promotion effect of FDI to exports is proved by the rolling window approach; it thus supports the KK model that divides FDI into lateral FDI and vertical FDI and proves that the constitution of FDI is critical to the relationship between FDI and exports.Practical implicationsChina has been facing adjustment of its economic structure in recent years, and in this situation, increasing the proportion of FDI that can bring advanced production function is critical for the industrial structural adjustment.Originality/valueThis paper uses the bootstrap rolling window causality test to investigate the time-varying nature of the causality between FDI and exports, considering structural changes for the first time. The authors further deepen the previous research and draw a more realistic conclusion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

Does foreign direct investment promote exports in China?

Download PDF
18 pages

Loading next page...
 
/lp/emerald-publishing/does-foreign-direct-investment-promote-exports-in-china-pFkQCofp2v

References (54)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2044-1398
DOI
10.1108/CFRI-04-2016-0026
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to investigate the causal link between foreign direct investment (FDI) and exports in China based on the knowledge capital model (KK model, Markusen, 2002).Design/methodology/approachThe bootstrap Granger full-sample and sub-sample rolling window causality test is used to determine whether FDI can promote exports.FindingsThe full-sample causality test indicates no causal relationship from FDI to exports. However, considering structural changes of exports and FDI, the authors’ find that the full-sample test is not reliable. Instead, the authors use the rolling window causality test to revisit the dynamic causal relationship, and the results present significant effects from FDI on exports, mostly around periods in which the proportion of FDI from Hong Kong, Macao and Taiwan is increasing. Specifically, positive impacts of FDI on exports are stronger than the negative impacts in China.Research limitations/implicationsThe findings in this study suggest a significant time-varying nature of the correlation between FDI and exports. The promotion effect of FDI to exports is proved by the rolling window approach; it thus supports the KK model that divides FDI into lateral FDI and vertical FDI and proves that the constitution of FDI is critical to the relationship between FDI and exports.Practical implicationsChina has been facing adjustment of its economic structure in recent years, and in this situation, increasing the proportion of FDI that can bring advanced production function is critical for the industrial structural adjustment.Originality/valueThis paper uses the bootstrap rolling window causality test to investigate the time-varying nature of the causality between FDI and exports, considering structural changes for the first time. The authors further deepen the previous research and draw a more realistic conclusion.

Journal

China Finance Review International – Emerald Publishing

Published: May 15, 2017

There are no references for this article.