SUBSTITUTIONARY OR COMPLEMENTARY RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND EXPORTS. EVIDENCE FROM TRANSITION COUNTRIES
SUBSTITUTIONARY OR COMPLEMENTARY RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND EXPORTS. EVIDENCE FROM TRANSITION COUNTRIES

Summary/Abstract: The objective of this research is to provide an empirical assessment on the nature of FDI in selected transition countries, using bilateral country level data on FDI flows and export flows, between 5 South East European Countries (SEE-5), 10-New EU member states (EN-NMS-10) and 20 countries from the Organization of Economic Cooperation and Development (OECD-20 countries), at a yearly time period from 1994 to 2010. For estimation purpose, we use Random Effect Tobit estimates. The study finds country characteristics, like differences in GDP and GDP per capita, as well as differences in factor endowments between countries at labor and capital base and trade cost are significantly related to export flows between countries. With regard to the relationship between exports and FDI the findings of the study support vertical nature of FDI in the SEE-5 and EU-NMS-10 countries, whereas, based on country characteristics findings the study supports horizontal nature of FDI.

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