Old Wine in a New Bottle: Trade Openness and FDI Flows - Are the Emerging Economies Converging?

16 Pages Posted: 26 Feb 2016

See all articles by Nicholas Apergis

Nicholas Apergis

Northumbria University - Economics Department

Arusha V. Cooray

Embassy of Sri Lanka, Oslo

Date Written: April 2016

Abstract

This study uses the club convergence methodology of Phillips and Sul (2007) for emerging economies spanning the period 1960–2013 to explore whether such convergence exists and whether the increase of international trade and foreign direct investment (FDI) flows has been a global or club phenomenon. We find the absence of a homogeneous convergence club. The results for FDI outflows also reach similar conclusions, suggesting the formation of convergence clubs by stage of development. These results suggest that policies that promote convergence in trade openness and FDI flows would permit countries to benefit from mutual interactions and by greater consistency and efficiency in trade regimes, thus permitting these countries to benefit from openness leading to a race to the top rather than bottom.

JEL Classification: F41, C33

Suggested Citation

Apergis, Nicholas and Cooray, Arusha V., Old Wine in a New Bottle: Trade Openness and FDI Flows - Are the Emerging Economies Converging? (April 2016). Contemporary Economic Policy, Vol. 34, Issue 2, pp. 336-351, 2016. Available at SSRN: https://ssrn.com/abstract=2738252 or http://dx.doi.org/10.1111/coep.12122

Nicholas Apergis (Contact Author)

Northumbria University - Economics Department ( email )

Newcastle-Upon-Tyne, NE1 8ST
United Kingdom

Arusha V. Cooray

Embassy of Sri Lanka, Oslo ( email )

Norway

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