Global Journal of Economics and Business

Volume 5 - Issue 1 (5) | PP: 87 - 95 Language : English
DOI : https://doi.org/10.31559/GJEB2018.5.1.5
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The Effect of Foreign Direct Investment on Trade: Empirical Evidence from Sri Lanka

NPG Samantha
Received Date Revised Date Accepted Date Publication Date
12/5/2018 19/6/2018 29/7/2018 4/9/2018
Abstract
Foreign direct investment and foreign trade are vital factors in economic growth and development. The purpose of this study is to investigate the long run relationship and short-run dynamics between the two variables in Sri Lankan context. The study applies the ARDL co-integration and bound test for annual time series data covering the period from 1980 to 2016. The empirical test finds a significant positive relationship between FDI and foreign trade in the short run as well as in the long run. The bound test confirms the existence of co-integration relations among the variables. The error term of the ARDL ECM model is statistically significant with expected sign confirming convergence of short-run shocks into the long run equilibrium. All the diagnostic and stability tests confirm the validity of the selected model in policy formulating.


How To Cite This Article
, N. S. (2018). The Effect of Foreign Direct Investment on Trade: Empirical Evidence from Sri Lanka . Global Journal of Economics and Business, 5 (1), 87-95, 10.31559/GJEB2018.5.1.5

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