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The Impact of Regional Integration and Third-Country Effects on FDI: Evidence from ASEAN
Nathapornpan Piyaareekul Uttama and Nicolas Peridy
ASEAN Economic Bulletin
Vol. 26, No. 3 (December 2009), pp. 239-252
Published by: ISEAS - Yusof Ishak Institute
Stable URL: http://www.jstor.org/stable/41317067
Page Count: 14
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This paper is aimed at providing a better understanding of FDI determinants in the main ASEAN countries through new developments in FDI theories. This paper simultaneously explores bilateral, third-country as well as regional integration as determinants for FDI. As an extension to the exisiting literature, it first proposes a theoretical framework which builds on and extends the work ofBaltagi, Egger, and Pfaffermayr (2007) by including the impact of regional integration. The theoretical model is then tested empirically for FDI flows from the United States to five ASEAN countries, i. e., Singapore, Malaysia, Thailand, Indonesia and Philippines, over the period 1995-2007 for fifteen industries. Alternative panel data models are considered, especially models with spatially correlated residuals. The results show that third-country effects and regional integration are significant determinants of FDI in ASEAN countries, especially for vertical and complex vertical FDI.
ASEAN Economic Bulletin © 2009 ISEAS - Yusof Ishak Institute