Trade-fdi nexus, Macroeconomics

Trade-FDI Nexus:

Economic liberalization promotes both trade and FDI. FDI could be export-promoting, import substituting or import enhancing depending upon supply and demand factors in the global economy. We usually do not look at direct magnitude of trade orientations of FDI but also its indirect effects- technological advancement, skill up-gradation, linkage effects with local firms, spillover and other related externalities, and reorientation of demand patterns.

Presently MNCs conduct a large proportion of world trade and have also become active in undertaking FDI. Though MNCs provide linkage between FDI and trade, determinants of this relationship (linkage) are mostly country-specific such as size of the local market, factor cost in the host market, location advantage as also trade investment restrictions in the host home countries.

Available information suggests that the contribution of FDI to export expansion has been quite large for the ASEAN and China as they attracted mainly export- oriented FDI.  For instance, foreign affiliates accounted for about half of total exports of China during 2002 and even higher in some high tech products. In case of India, exports as percent of value of total production of foreign investment companies have shown a marginal increase during 1990s. Rather import intensity of these companies remained marginally higher than their export intensity. (RBI, Report on Currency and Finance 2002-03).

As stated earlier, trade- linked FDI in services sector provide enormous scope for Indian exporters. Recently, Indian MNCs began seeking investment via cross-border M&A activities particularly in software industry in USA and UK.

Due  to technological advances  in  ICT  (Information, Communication and Telecom), possibilities for export-oriented FDI  in data processing, accounting and similar services  have gone  up tremendously  (Medium  Tm  Export Strategy 2002-07).


Posted Date: 11/9/2012 4:41:53 AM | Location : United States

Related Discussions:- Trade-fdi nexus, Assignment Help, Ask Question on Trade-fdi nexus, Get Answer, Expert's Help, Trade-fdi nexus Discussions

Write discussion on Trade-fdi nexus
Your posts are moderated
Related Questions
Explain how changes in the quality of health care will influence the demand for care.

A group has chartered a bus to Atlanta. The driver costs $200, the bus costs $500, and parking in Atlanta will be $90. You have already paid $700 to reserve the bus and a driver. T

In the long-run framework, deficits reduce: A. investment. B. taxes. C. government consumption. D. subsidies.

using a graph of the classical labour market,illustrate the effects of a real wage existing in the market that is lower than the equilibrium real wage.What will eventually happen i

As it turns out, there is little evidence to support a direct causation between income and children. (If I am poor, then I will decide to have a lot of children? Alternatively: I h

Compared with the situation before 1981, the marginal tax rates imposed on individuals and families with high incomes are now lower. What was the top marginal personal income tax r

Using a flexible exchange rate system with imperfect capital mobility explain the impact that an open economy has on the effectiveness of monetary and fiscal policy. 2. Using a fl

What are the effects of the fiscal stimulus on the macroeconomy

You are the manager of a firm that receives revenues of $50,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -3,

A firm with two factories, one in Michigan and one in Texas, has decided that it should produce a total of 500 units to maximize profit. The firm is currently producing 200 units i