Is there a euro effect in the drivers of US FDI? New evidence using Bayesian model averaging techniques

In this paper the authors analyze the potential determinants of US outward FDI stock with a particular focus on the euro effect during the period 1985–2017. To this aim, they consider a large set of candidate variables suggested both by theory and previous empirical analysis. They select the covariates using Bayesian model averaging, a data-driven methodology. Their sample includes a total of 56 host countries, that represent around the 70% of US outward FDI stock. They study the role of the euro on American FDI both in Europe and the rest of the world. In Europe, they consider various country groups: the European Union (EU), the euro area (EA), as well as core and periphery within this last group. They conclude that many variables studied by previous FDI literature cannot be considered robust determinants. Moreover, US OFDI is explained by both horizontal and vertical motives. However, HFDI strategies predominate in EA core countries, whereas VFDI prevails in the periphery. As for the euro effect, the common currency seems to have played an important role encouraging US FDI, being a crucial element in the convergence of EA periphery to its core. In addition, the results indicate that the adoption of the euro has favoured VFDI to the detriment of HFDI.

     

Vertical Intra-Industry Trade and Foreign Direct Investment between Japan and European Countries

In this paper, we provide an overview of the development of vertical intra-industry trade (VIIT) between Japan and various European countries, including both old and new EU members, as well as emerging Central and Eastern European countries. VIIT indices constructed in this paper cover a much wider range of margins of unit price ratio than existing studies. Our empirical model attempts to explain the distributional characteristics of VIIT through foreign direct investments (FDI), in addition to traditional determinants of IIT, such as differences in GDP per capita, average GDP, and smaller and larger GDPs. Our sample covers the period from 1988 to 2004 for bilateral trade between Japan and 31 European countries. Our econometric methodology for these panel data uses fixed-effect model estimation with a variable transformation determined by a Box-Cox approach. We find that intra-industry trade between European countries and Japan increases with their corresponding Japanese FDIs, especially for new EU member countries. Our results also indicate that it is important to measure a wider range of quality based on relative prices rather than the traditional ratio used in the literature.     

Vertical intra-industry trade and foreign direct investment in East Asia

As economic integration in East Asia progresses, trade patterns within the region are displaying an ever-greater complexity: Though inter-industry trade still accounts for the majority, its share in overall trade is declining. Instead, intra-industry trade (IIT), which can be further divided into horizontal IIT (HIIT) and vertical IIT (VIIT), is growing in importance.In this paper, we set out to measure and examine vertical intra-industry trade patterns in the East Asian region and compare these with the results of previous studies focusing on the EU, to which such analyses so far have been confined. Based on the supposition that VIIT is closely related to offshore production by multinational enterprises, we then develop a model to capture the main determinants of VIIT that explicitly includes the role of FDI. The model is tested empirically using data from the electrical machinery industry. The findings support our hypothesis, showing that FDI plays a significant role in the rapid increase in VIIT in East Asia seen in recent years. J. Japanese Int. Economies 17 (4) (2003) 468–506.     

Estimating the export and import demand for manufactured goods: The role of FDI

In this paper we estimate the demand for exports and imports of manufactured goods for a panel containing the majority of the EU countries as well as the United States and Japan. The model includes as explanatory factors both the traditional determinants of trade and also the stock of foreign direct investment (FDI). We apply panel unit root and cointegration tests allowing for heterogeneity. Whereas there is no evidence of cointegration when using just the traditional formulation, the results are favorable to the existence of long-run relationships linking the variables of the augmented model. Moreover, the results point mainly to a complementary relationship between trade and FDI.     

Estimating the export and import demand for manufactured goods: The role of FDI

In this paper we estimate the demand for exports and imports of manufactured goods for a panel containing the majority of the EU countries as well as the United States and Japan. The model includes as explanatory factors both the traditional determinants of trade and also the stock of foreign direct investment (FDI). We apply panel unit root and cointegration tests allowing for heterogeneity. Whereas there is no evidence of cointegration when using just the traditional formulation, the results are favorable to the existence of long-run relationships linking the variables of the augmented model. Moreover, the results point mainly to a complementary relationship between trade and FDI.     

Comparative advantage FDI? A host country perspective

Recent empirical studies of the determinants of multinational activity across countries have found overwhelming support for a horizontal rather than a vertical model of foreign direct investment (FDI). They all use US or other developed country data. This paper, in contrast, uses a detailed industry-level data set on FDI in a relatively skilled-labor and capital scarce country, Mexico, to shed light on the determinants of FDI between largely dissimilar countries. The results indicate considerably more support for a comparative advantage motive for FDI, although a market access motive is present as well. The correlation between skill differences and FDI is positive in all industries, but when differences are large, FDI flows into sectors that are intensive in total labor, regardless of skill level. The concentration of multinational activity in (unskilled) labor intensive industries suggests a potential for spillover effects.     

吸收能力和贸易政策对FDI技术溢出的影响分析——基于中国工业部门面板数据的实证研究

FDI的技术溢出不是自发产生的,溢出效应受到东道国国内的政策和经济环境的影响,其中两个重要因素是东道国的吸收能力和贸易政策。本文利用工业部门2005—2008年的数据,实证分析了FDI溢出效应。在考虑了前向联系和后向联系中的直接影响和间接影响情况下,检验了FDI横向溢出和纵向溢出,分析了吸收能力和贸易政策对FDI溢出效应的影响。我国的横向溢出和后向溢出不显著,前向溢出显著;吸收能力和贸易政策对外商在华投资的溢出效应产生不利影响。

Abstract：

FDI spillovers are assumed not to be automatic but are hypothesized as being a function of the domestic policies and economic environment in host countries.Two determinants have been generally recognized,the absorptive capability and the trade policy.This paper examines FDI spillovers using the industrial data during the period 2005—2008.Taking the direct and indi-rect effect into forward and backward linkages,both horizontal and vertical FDI spillovers are examined,and the effect of the absorptive capability and the trade policy on FDI spillovers are analyzed.The results show that the spillovers through horizontal spillovers and backward link-ages are insignificant,while positive spillovers through forward linkages are statistically significant.Absorptive capability and trade policy produce unfavorable effects on FDI spillovers.     

Structural Breaks and Spatial Linkages in FDI: Further Evidence in OECD Countries

This paper evaluates the knowledge–capital model (KCM) of foreign direct investment (FDI) as defined by Braconier et al. (Rev Int Econ 13(4):770-786, 2005). The model predicts that there are both horizontal and vertical motivations for engaging in FDI. The horizontal motives regard access to new markets in the case of trade frictions, whereas the vertical motivations imply that multinational enterprises seek to take advantage of relative skill differences in different countries. The impact of the vertical component in the KCM has been largely debated and thereby is of the greatest interest. Another issue addressed in the study is the relevance of spatial interdependencies in FDI flow. To check for these kinds of FDI determinants the KCM model is augmented with a surrounding market potential and a spatial lag term. By using large data sets for FDI stocks among OECD countries from 1982 to 2003 along with structural breaks and spatial econometric techniques, the paper evaluates the significance of traditional and spatial FDI determinants. The results show that the vertical component is indeed important, even for FDI among OECD countries, but that this importance is clearly decreasing over time. The findings point towards the existence of spatial linkages that are also compatible with export-platform motivations.     

Vertical Specialization and New Determinants of FDI: Evidence from South and East Asia

Abstract

By estimating a dynamic panel-gravity model of bilateral foreign direcr investment (FDI), this article investigates the location determinants of inward FDI in South and East Asia and assesses their short-run and long-run effects. The econometric results highlight the importance of the vertical specialization-, trade-, and international integration-related location factors. The gravity-specific variables are also found to be significant location determinants, whilst some of the traditional determinants are found to have either a weak or statistically insignificant effect (except host-market size) on inward FDI in South and East Asia.     

Location choice in low-income countries: Evidence from Japanese investments in East Asia

Unlike most existing studies, this paper examines the location choices of multinational enterprises (MNEs) in low-income countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model and a mixed logit model at the province level. Our findings are as follows. First, Japanese MNEs consider Cambodia, Laos, Myanmar, and Vietnam to be host countries different from China and the forerunners of ASEAN. In other words, for Japanese investors, ASEAN forerunners are countries replaceable by China. Second, the mechanics of vertical FDI are more likely to appear in FDIs in low-income countries. For example, rather than the market size of the host country, tariff rates on products from investing countries are more crucial location elements.     

Has China Crowded out Foreign Direct Investment from Its Developing East Asian Neighbors？

This paper applies a gravity model to investigate the determinants of foreign direct investment (FDI) in East Asia. Economic fundamentals, such as market size, per capita income and country risk indicators, economic and cultural ties, exchange rate volatilities and information asymmetry are found to be important determinants for FDI. Globally, the inward FDI among high-income OECD economies declined significantly on average over the period of 1990-2003, whereas the inward FDI of the high-income OECD economies in emerging market economies gained substantially. In the East Asian region, the ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand) received above-average inward FDI from the high-income OECD economies after controlling for their economic fundamentals. By contrast, China's FDI from the high-income OECD economies is below average relative to its economic fundamentals. Therefore, it is difficult to establish that China has crowded out FDI from its developing ASEAN neighbors.     

Understanding bilateral FDI flows in developing Asia

Unlike trade flows, there has been little to no detailed examination of foreign direct investment (FDI) flows between Asian economies. This paper uses bilateral FDI flows data to investigate trends in intra-Asian FDI flows over the period 1990–2005. It employs an augmented gravity model to identify the main determinants of intra-Asian FDI flows. Possible drivers of FDI flows, including transactional and informational distance (proxied by distance), real sector variables, financial variables and quality of institutions are examined.     

日本对华直接投资对中日产业结构的影响途径与效果

在日本对华直接投资战略的影响下，中日两国的产业结构发生了深刻的变化。从生产波及效果和生产诱发效果来看，中日两国早期存在的单纯的垂直分工体系正在被打破，日本从倚重于与中国的垂直产业分工正在向注重资本、技术集约性产业的水平分工转变，水平产业分工体系正在逐渐成为中日两国之间的主要体系。     

后危机时代日本对华投资的新机遇与前景展望

由于各种原因,日本对华投资近年来出现低潮,特别是在金融危机的冲击下,状况愈加严峻。但是,世界经济回暖、中国经济结构的调整以及日本民主党新政权“东亚共同体构想”的提出,为后危机时代的日本对华直接投资提供了新的机遇,低迷的日本对华投资可望走出低谷。     

Fragmentation and trade: US inward processing trade in the EU

Fragmentation and Trade: US Inward Processing Trade in the EU. — Fragmentation, which refers to the splitting up of a previously integrated production process into separate components, is seen as one of the reasons for the increasing globalization of the world economy. This paper undertakes an empirical study of the extent of US inward processing trade (IPT) in the EU, which we use as a proxy for fragmentation in trade. We also provide empirical evidence on the determinants of the distribution of US IPT across manufacturing sectors in the twelve EU member states. Our results give support to the importance of comparative advantage for the sectoral distribution of US IPT. Also, we find that the labour costs and the level of US FDI stocks affect US IPT in EU peripheral countries, while they do not seem to have any impact on EU core countries.     

新加坡金融服务双向贸易的决定因素

从金融市场结构看,新加坡出口市场更分散,且重要市场比重下滑,但对印度金融服务出口快速上升;而香港金融服务出口更集中且国际化多元化突出。新加坡金融服务与日、韩、香港、美等GL指数较高呈水平分工,与中国和印度GL指数较低呈垂直分工。而决定这一分工现状的主要因素依次为金融市场规模、外来投资以及金融市场开放程度。     

Can foreign direct investment promote BIT signing?

Compared to the vast number of previous studies on the impact of bilateral investment treaties (BITs) on Foreign Direct Investment (FDI), this paper empirically analyses how previous FDI affects BIT signing by using annual data covering 258 countries for the period 2002–2012. We find that the likelihood of signing BITs between two countries is higher when the country-pair has a larger sum of FDI stock and a larger FDI difference, and this effect is more pronounced in middle- and low-income countries than high-income countries. Further research finds that the institutional gap is an important factor that can enhance the positive impact of FDI stock/ FDI difference on the signing of BITs. The contribution of this research lies in providing a benchmark for incorporating more economic variables into the understanding of the determinants of BIT signing. In particular, the role of FDI should be given more attention.     

Structural funds, EU enlargement, and the redistribution of FDI in Europe

The EU enlargements of 2004 led to a redirection of Structural and Cohesion Funds expenditures from EU-15 to new EU members as did those of 2007. This redistribution of funds makes the accession countries even more attractive as a location of FDI. Using a logistic regressions approach, this paper shows that a reallocation of structural funds as outlined in Agenda (For a stronger and wider union, COM(97) 2000 final, 2000) and successive revisions of the financial perspectives for an enlarged union leads to a redistribution of FDI by approximately 4−8 percentage points from the current EU members to the accession countries (2004 scenario) and 7−10 percentage points (2007 scenario), respectively.     

Political regime and FDI from advanced to emerging countries

We investigate the effect of the political regime on bilateral FDI flows from advanced to emerging countries in the period 1992–2004. We control for country size, per capita income and privatization proceeds in the host country, and use a random-effect Tobit model to exploit information from zero entries. Our results suggest that democracy does have a positive effect on the amount and probability of FDI flows from developed to emerging countries. Moreover, we find that the effect of democracy on FDI also works through the total factor productivity channel, not only the political risk one as suggested in the literature.

Vertical foreign direct investment: Evidence from Japanese and U.S. multinational enterprises

Foreign direct investment (FDI) in developing countries has increased since the 1990s, but there is mixed evidence of vertical FDI associated with factor-seeking motives. This paper estimates the vertical motive of offshore production by multinational enterprises (MNEs) by exploiting past schooling characteristics as instruments for skilled-labor abundance in a host country. Using panel data on Japanese and U.S. MNEs in the 1990s, I find that skilled-labor abundance has a significantly negative impact on sales of manufacturing foreign affiliate only for Japanese MNEs. The results suggest that vertical FDI activity was more prevalent in Japanese MNEs than U.S. MNEs. A plausible explanation is that Japanese MNEs might be more vertically integrated with their offshore production than U.S. MNEs. A difference in foreign outsourcing activities could generate the observed deviation between Japanese and U.S. MNEs.