(1) Department of Economics, Jaume I University, Campus de Riu Sec, E-12080 Castellón, Spain;(2) University of Valencia, Spain
Abstract:
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.