Effect of the Foreign Direct Investment on the Jordanian Manufacturing Exports and Imports Performance:An Analytical Study for the Period (1995-2012)

Hussam Ali Daoud, Ahmad F. Oran, Taleb Awad

Abstract


Foreign direct investment (FDI) and trade are at the core of the globalization process and stand for the mobility of capital and goods across borders. Both build and increase the complexity of economic interdependence between distinct economies. Thus, it is very important to have a good understanding of the economic and social effects associated with FDI and trade and interactions between them as well.
The objective of this study is to evaluate the effect of FDI on the Jordanian manufacturing exports and imports performance; during the period (1995-2012). Limited Information Maximum Likelihood (LIML) techniques have been used to evaluate the mentioned effect.
The study supports a positive correlation between foreign investment and trade "exports and imports" in Jordan. This suggests that FDI and trade are complements, rather than substitutes, suggesting that exports and imports grow in the same direction in which to grow foreign direct investment (FDI). The contribution of FDI in increasing the level of exports is more significant. However, the credit should be shared with the influence of subsidies, whereas the contribution of FDI in increasing the level of import should be shared with the influence of imports lag, tariff rates, and economic openness.

Keywords


Foreign Direct Investment, Export, Import, Limited Information Maximum Likelihood Method, Jordanian economy.

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