Determinants of intra-FDI flows among ASEAN+3+3 economies
by Atif Awad; Ishak Yussof
Global Business and Economics Review (GBER), Vol. 20, No. 2, 2018

Abstract: On the basis of the knowledge-capital model of FDI, present study examines the impact current bilateral free trade agreement (FTA) on intra-FDI flow among ASEAN+3+3 countries. We employed extended form of gravity model on data of bilateral FDI flow among these countries during the period 2001-2012. In addition to basic gravity variables, we examined the role of each of the levels of human capital, natural resources, investment incentive policies, exchange rate, labour cost, institutional quality and FTA on intra-FDI flow among these economies. The results showed that low labour cost, availability of natural resources, investment incentive policies, institution quality and the appreciation of host country's local currency tend to increase intra-FDI flow among these countries. For the factor of interest, the results detected negative impact of FTA on the intra-FDI flow among these countries. This finding, which is consistent with knowledge-capital model of FDI, suggest that it is likely for FTA to increase the economic integration among ASEAN+3+3 economies via improvement in bilateral trade of goods and services and not through bilateral investment.

Online publication date: Wed, 28-Feb-2018

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