FDI, trade and growth, a causal link?

Nigel L. Driffield, Rakesh Bissoondeeal, Mayang Pramadhani

Research output: Preprint or Working paperWorking paper


. FDI, Trade and Growth, a Causal Link? (RP0710) Prof Nigel DRIFFIELD Dr Rakesh BISSOONDEEAL Mayang Pramadhani Non-technical Summary This paper explores the relationship between imports, exports, foreign direct investment and growth. For some time there has been a good deal of debate whether trade and foreign direct investment) FDI are substitutes and complements, with the existing literature generating some rather contradictory findings. We show, for Indonesia that inward FDI and both imports and exports are complementary, and further that FDI causes an increase in trade. This is of particular interest for a country such as Indonesia, that has attracted a high proportion of export-orientated inward investment. This, theoretically at least is associated with an increase in imports, in the form of capital goods and components, but a reduction in imports. We show that the previous literature that fails to find such a relationship does so because both trade and FDI are associated with growth, and previous work ignores these growth effects when seeking to isolate the relationship between trade and FDI.
Original languageEnglish
Place of PublicationBirmingham (UK)
PublisherAston University
ISBN (Print)978-1-85449-700-0
Publication statusPublished - Mar 2007

Publication series

NameAston Business School research papers
PublisherAston University

Bibliographical note

Aston Business School Research Papers are published by the Institute to bring the results of research in progress to a wider audience and to facilitate discussion. They will normally be published in a revised form subsequently and the agreement of the authors should be obtained before referring to its contents in other published works.


  • FDI exporting
  • growth
  • causality


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