A Novel Study on OFDI and Home Country Exports: Implications for the ASEAN Region

Journal of Chinese Economic and Foreign Trade Studies, Vol. 9, No. 2, 2016

17 Pages Posted: 24 Aug 2015 Last revised: 4 Aug 2016

See all articles by Fayyaz Ahmad

Fayyaz Ahmad

Lanzhou University

Muhammad Umar Draz

Universiti Teknologi PETRONAS

Su-chang Yang

Lanzhou University

Date Written: August 22, 2015

Abstract

Purpose - The purpose of this paper is to examine the effects of outward foreign direct investment (OFDI) on the competitiveness of home-country exports in ASEAN region.

Design/Methodology/Approach - The paper uses OLS regressions based on unit root, correlation techniques and a battery of specification tests applied to an annual time series data ranging from 1981 to 2013. Diagnostic test underscore the accuracy and reliability of estimations.

Findings - The paper reveals that the coefficients of OFDI are positive and significant for four ASEAN countries, i.e. Malaysia, Philippines, Singapore and Thailand. It supports the argument that complementary outweighs the substitution effects of OFDI on exports of home country. Moreover, trade openness is significantly influential on exports, which indicates the positive impact of trade liberalization. In addition, currency fluctuations and inward FDI are also important factors for progressive home country exports.

Originality/Value - The paper provides thorough analysis of links between OFDI and exports of home country on macro level with the data set of more than three decades for emerging ASEAN economies, rather than focusing on developed regions. This is the first attempt of its kind to analyze the relationship of these two variables on aggregate level for ASEAN region from 1981 to 2013 data set. In order to reinforce investment flows authorities should continue progressive reduction of barriers and market reforms to enhance the progressive role of inward and outward capital flows.

Keywords: ASEAN, Home country exports, OFDI, Trade openness

JEL Classification: F21, F49

Suggested Citation

Ahmad, Fayyaz and Draz, Muhammad Umar and Yang, Su-chang, A Novel Study on OFDI and Home Country Exports: Implications for the ASEAN Region (August 22, 2015). Journal of Chinese Economic and Foreign Trade Studies, Vol. 9, No. 2, 2016, Available at SSRN: https://ssrn.com/abstract=2649493 or http://dx.doi.org/10.2139/ssrn.2649493

Fayyaz Ahmad

Lanzhou University ( email )

199 Donggang West Road
Lanzhou City, Gansu Province 730000
China

Muhammad Umar Draz (Contact Author)

Universiti Teknologi PETRONAS ( email )

Department of Management and Humanities
Seri Iskandar, Perak 32610
Malaysia

Su-chang Yang

Lanzhou University ( email )

Lanzhou University
199 Donggang West Road
Lanzhou, Gansu 730000
China

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