The Nexus between Foreign Direct Investments and International Trade: Case of N-11 Countries

Abstract

Trade and economic relations of the countries have increased in consequence of the acceleration of the integration in the global economy. Accordingly, it has become important to analyze the relationships between foreign direct investments and international trade that countries have realized at an increasing level as a result of globalization. This study aims to analyze the relationships between foreign direct investments inflow and outflow in the N-11 countries and the exports and imports of these countries. The long-term relationships between the variables were analyzed by Westerlund panel cointegration test. According to the results, it has been determined that there are long-term relationships among the international trade of N-11 countries and foreign direct investments inflow and outflow. According to the results of the Dumitrescu-Hurlin panel causality test, which revealed the causality relations among the variables, there are bidirectional causality relationships between foreign direct investment inflows to N-11 countries and exports and imports. On the other hand, it has been determined that there are unidirectional causality relationships from foreign direct investment outflows to exports and imports in N-11 countries.