FOREIGN DIRECT-INVESTMENT AND EXPORTS - A TIME-SERIES APPROACH

The impact of the accelerated internationalization of the last decade on the Austrian economy is a controversial issue. Granger's concept of causality is used to investigate one aspect of the internationalization of production: the relationship between foreign outward direct investment and exports using aggregate flow data from the Austrian economy. The stationarity of the time series is examined and cointegration tests for the adequacy of the multivariate time series approach are performed. The estimation results suggest significant causality of Austrian foreign outward direct investment and exports in both directions. Impulse response analysis and variance decomposition show a very slow dynamic response of both variables to exogenous shocks of the other. It furthermore indicates the possibility of a positive effect of exogenously increased foreign direct investment on exports and a negative effect of export shocks on foreign direct investment; however, significant long-run effects are not established.