The relationship between intra-industry foreign direct investment and intra-industry trade in China

• Main Authors: Lyu Licai, Blandford David
• Format: Article
• Language: English
• Published: Economists' Association of Vojvodina 2019-01-01
• Series: Panoeconomicus
• Subjects: intra-industry foreign direct investment; intra-industry trade; cointegration; Granger causality
• Online Access: http://www.doiserbia.nb.rs/img/doi/1452-595X/2019/1452-595X1600027L.pdf

This paper explores the relationship between intra-industry investment (III) and intra-industry trade (IIT) using cointegration and the Granger causality test. The empirical results indicate that there is a long-run equilibrium cointegration relationship between III and IIT in Chinese agriculture, manufacturing, the service sector and industry as a whole, and that this relationship is negative. Unidirectional Granger causality runs from III to IIT in manufacturing, the service sector and industry as a whole, but there is no strong evidence of causality running from IIT to III in any industry in China.