A Panel Analysis of the FDI Impact on International Trade

This paper examines the relationship between Foreign Direct Investment (FDI) and international trade. Specifically, the relationship between the stock of outward FDI, and inward FDI and Imports and Exports in the Portuguese economy. This paper also studies some technical problems associated with panel data have frequently been ignored in previous studies. The problems of serial and contemporaneous correlation have not been taken into account by a panel approach and, as we know, they can have an impact on estimates and statistical inferences. The results show that there exist a country-specific effect on the corrected panel data of heteroscedasticity and correltion and a complementary relationship between trade and inward stock of FDI.FDI, Trade, Gravity Analysis, Panel Data