monireh rafat; Mostafa Emadzadeh; Zahra Ghandehary Alavijeh
Abstract
Globalization and economic openness, by raising external risks, increase the presence and interference of governments to support domestic economy. However, by integrating markets and creating competition in private sector, globalization decreases the presence of government in the economy. In this paper, ...
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Globalization and economic openness, by raising external risks, increase the presence and interference of governments to support domestic economy. However, by integrating markets and creating competition in private sector, globalization decreases the presence of government in the economy. In this paper, under the theoretical framework of compensatory and efficiency hypotheses, the relationship between government size and economic openness in the long- and short-term is investigated for select member countries of Organization of Islamic Cooperation for period 1998-2015. The designed model is estimated by using vector autoregressive (VAR) and the two-stage least squares (2SLS) methods. The results of vector error correction model (VECM) estimation show that in short run, government size, population and financial openness influence government size. In the long run, urbanization and population variables have the greatest impact on government size. The effect of financial openness on government size in the long run is decreasing, but the effect of the trade openness is increasing. The results of 2SLS estimation also show that the effect of efficiency hypothesis on the size of the government cannot outweight the incremental effect of the compensatory hypothesis and, as a result, with increasing economic openness in these countries, government size has become larger.
Batoul Raf’at; Seyed Komail Tayyebi
Volume 10, Issue 36 , April 2010, , Pages 41-58
Abstract
This study examines the relationships between FDI flows and trade to Iran. Theoretically, FDI and international trade can be substitute or complementary. Within the early theories of foreign direct investment and multinational firms, FDI and foreign trade were considered to be substitute. New international ...
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This study examines the relationships between FDI flows and trade to Iran. Theoretically, FDI and international trade can be substitute or complementary. Within the early theories of foreign direct investment and multinational firms, FDI and foreign trade were considered to be substitute. New international trade theories emphasize, the complementary relationship between FDI and foreign trade .This is the result of introducing new aspects in the models like increasing returns to scale, product differentiation and technology-differences among nations. We study empirically the impact of foreign trade on foreign direct investment (FDI), using data on inward FDI to Iran from 1973 through 2006.
We find that foreign trade can encourage FDI and also FDI can increase trade. On the other hand, results show that there is a complementary relationship between trade and FDI. Beside trade, GDP, Exchange rate and some economic variables are affected by FDI.