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Assess the theoretical basis and empirical evidence of the b

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Sophia Syed

on 28 April 2014

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Transcript of Assess the theoretical basis and empirical evidence of the b

Chart 2
The increasing importance of foreign direct investment in the world economy calls for theoretical and empirical investigations into the manner in which FDI affects the linkages among countries. Analysis indicates that some FDI tends to expand manufacturing trade, while other FDI clearly reduces the volumes of manufacturing trade.
Given the mixed pattern linkages, it is reasonable to ask whether the Latin American results are expected to generalize to other partnering relationships among countries around the world.

International Trade & Factor Mobility: An Empirical Investigation
By Sophia Syed
Table 3
Regression Equation
Testing for effects of FDI on trade

Direct investment to a sector is predicted to increase its net export balance, ceteris paribus, and to decrease the
net export balance of other sectors, by drawing resources away from these other sectors.

The basic time-series cross-section regression equation for a particular Latin
American country takes the form:

Goldberg, Linda S. and Klein, Michael W. (1999) International Trade & Factor Mobility: An Empirical Investigation.

Robert Mundell is a key component in discussing the implications of physical capital mobility for international trade.
This paper focuses on the linkages between international capital movements, domestic production and international trade which is very relevant today given the massive and volatile capital flows to emerging markets observed from the 1990s

Furthermore, this paper take a close look at how the net exports of specific manufacturing sectors of eight Latin American countries (Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Venezuela) respond to direct investment from the United States into those specific
sectors, as well as into other manufacturing and non-manufacturing sectors of their

Chart 1
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