The impact of FDI on export performance: Empirical evidence

Abstract

The objective of this paper is to investigate empirically the impact of the FDI inflows on export performance of Macedonia and Turkey. To achieve this objective we use a popular model of export and estimate two models. The first (benchmark) model includes the real effective exchange rate, the potential GDP, trade liberalization and export in the previous year. Along with these explanatory variables, in the second model we include the FDI inflows variable. The results of the benchmark model indicate that trade liberalization has a positive and significant impact on export. The export performance is positively and significantly affected by the last year's exports. The estimated coefficient of real effective exchange rate is not statistically significant. The potential output has a positive impact on the increase of export but it is also statistically not significant. The results of the second model indicate that FDI have a positive impact on export performance of Macedonia and Turkey, but not significant.