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Trade policy space and foreign direct investment inflows

Trade policy space and foreign direct investment inflows This study aims to use a quantitative measure of trade policy space to investigate empirically whether trade policy space influences foreign direct investment (FDI) flows to countries.Design/methodology/approachThe empirical analysis covers an unbalanced panel data set of 158 countries, over the period 1995–2015 and uses the two-step system generalized methods of moments approach.FindingsThe results suggest that the impact of trade policy space on FDI inflows is positive and increases as countries enjoy greater trade policy space. Furthermore, advanced economies tend to experience a higher positive impact of trade policy space on FDI inflows than less advanced economies.Research limitations/implicationsThese findings highlight the relevance of trade policy space for countries’ FDI inflows.Practical implicationsThe analysis shows that non-trade related constraints to trade policy could reduce trade policy space and adversely influence FDI inflows, which are critical for countries’ economic growth and development.Originality/valueTo the best of the knowledge, this topic has not been addressed in the literature. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of International Business and Strategy Emerald Publishing

Trade policy space and foreign direct investment inflows

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2059-6014
DOI
10.1108/ribs-05-2019-0056
Publisher site
See Article on Publisher Site

Abstract

This study aims to use a quantitative measure of trade policy space to investigate empirically whether trade policy space influences foreign direct investment (FDI) flows to countries.Design/methodology/approachThe empirical analysis covers an unbalanced panel data set of 158 countries, over the period 1995–2015 and uses the two-step system generalized methods of moments approach.FindingsThe results suggest that the impact of trade policy space on FDI inflows is positive and increases as countries enjoy greater trade policy space. Furthermore, advanced economies tend to experience a higher positive impact of trade policy space on FDI inflows than less advanced economies.Research limitations/implicationsThese findings highlight the relevance of trade policy space for countries’ FDI inflows.Practical implicationsThe analysis shows that non-trade related constraints to trade policy could reduce trade policy space and adversely influence FDI inflows, which are critical for countries’ economic growth and development.Originality/valueTo the best of the knowledge, this topic has not been addressed in the literature.

Journal

Review of International Business and StrategyEmerald Publishing

Published: Sep 11, 2020

Keywords: FDI inflows; Developed and developing countries; Trade policy space

References