Outward FDI effects on the Portuguese Trade Balance, 1996-2007

• Author(s): Fonseca, Miguel ; Mendonça, António ; Passos, José
• Date: 2009
• Persistent ID: http://hdl.handle.net/10400.5/857
• Origin: Repositório da UTL
• Subject(s): Foreign Direct Investment; Trade; Gravity Model; Portugal
• Document Type: Preprint
• Language: English

Description

Given the increased internationalisation of the Portuguese economy through outward Foreign Direct Investment (FDI), particularly on the Portuguese-speaking countries, our main objective is to discuss the empirical relationship between this outward FDI and trade. We use panel data analysis within a framework of gravity equations for exports and imports, with a sample composed by EU-15, U.S.A., Brazil, Angola, Japan and China, for the period 1996-2007. Our main conclusion is that the empirical evidence for Portugal is consistent with a substitution hypothesis between direct investment abroad and trade, and consequently we detect a negative trade balance effect with the majority of countries in our sample, excepting Angola and, in a lesser extension, Spain.