FDI Penetration and Net Trade in the EU Accession Countries

Publication date: 1 Jun 2003 | Publication type: NIESR Discussion Paper | NIESR Author(s): Holland, D | JEL Classification: F210, F400, P200 | NIESR Discussion Paper Number: 226

This paper explores the link between foreign direct investment and trade in a panel of four countries that will accede to the European Union in 2004: Poland, Hungary, the Czech Republic and Slovenia. We augment standard demand-side export and import equations with a measure of FDI penetration. We compare results based on a panel mean-group estimator with a fixed-effects panel model that allows variation across slope parameters where necessary. We find that FDI penetration has a broadly neutral impact on the trade balance. However, the trade intensity of foreign firms differs significantly across countries.

Keyword tags: 
trade, FDI, EU accession, panel data