TY  - JOUR
AU  - Aizenman,Joshua
AU  - Noy,Ilan
TI  - FDI and Trade -- Two Way Linkages?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11403
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11403
L1  - http://www.nber.org/papers/w11403.pdf
N1  - Author contact info:
Joshua Aizenman
Economics and SIR
USC
University Park
Los Angeles, CA 90089-0043
Tel: 213-740-4066
E-Mail: aizenman@usc.edu

Ilan Noy
Saunders Hall 542
2424 Maile Way
University of Hawaii, Manoa
Honolulu, HI 96822
Tel: 808 9567749
E-Mail: noy@hawaii.edu
AB  - The purpose of this paper is to investigate the intertemporal linkages between FDI and disaggregated measures of international trade. We outline a model exemplifying some of these linkages, describe several methods for investigating two-way feedbacks between various categories of trade, and apply them to the recent experience of developing countries. After controlling for other macroeconomic and institutional effects, we find that the strongest feedback between the sub-accounts is between FDI and manufacturing trade. More precisely, applying Geweke (1982)%u2019s decomposition method, we find that most of the linear feedback between trade and FDI (81%) can be accounted for by Granger-causality from FDI gross flows to trade openness (50%) and from trade to FDI (31%). The rest of the total linear feedback is attributable to simultaneous correlation between the two annual series.
ER  -