Is FDI Led Exports in New Zealand?

Abstract

The objectives of the paper are to study foreign trade and investment dimensions of New Zealand in comparison with its competitors such as Australia, China, India, Japan and Republic ofKorea and to study the rote of FDI to the growth ofexports. Vector autoregression model (VAR) is adopted to estimate the long run causal relationship among exports. foreign direct investment and GDP The cointegration test result shows that there exist a long run equilibrium relationship among exports, FDI and GDP. It Is found from the estimated Error Correction Model that FIX is a significant variable and the result indicates that I per cent increase in FD! will lead to 0.62 per cent increase in exports with one year time gap. Granger Causality Test indicates that there is a unilateral relationship between exports and PD! and the direction Is from FD! to exports which means that FD! causes exports.