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Issue Q2 2010  
Trade-FDI Linkages in a Simultaneous Equations System of Gravity Models for German Regional Data  
Timo Mitze
Alecke Björn
Gerhard Untiedt
Using regional data, we analyze the nature of German trade-FDI linkages within the EU27 for a system of gravity equations. Starting from a macroeconomic perspective, our analysis supports earlier empirical evidence for Germany in finding substitutive links between trade and outward FDI. However, switching to a (macro-)regional perspective, we reveal additional complementary correlations, which can be motivated by recent theoretical approaches. We also find regional heterogeneity, which emphasizes the need to take into account the regional dimension in analyzing cross-variable linkages between trade and FDI. Abstract

Trade ; FDI ; panel data ; simultaneous equations ; Keywords
C33 ; F14 ; F21 ; JEL classification
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