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Outward FDI Effects On The Portuguese Trade Balance, 1996-2007

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Executive Summary

Given the increased internationalisation of the Portuguese economy through outward Foreign Direct Investment (FDI), particularly on the Portuguese-speaking countries, the authors' main objective is to discuss the empirical relationship between this outward FDI and trade. They use panel data analysis within a framework of gravity equations for exports and imports, with a sample composed by EU-15, U.S.A., Brazil, Angola, Japan and China, for the period 1996-2007. Their main conclusion is that the empirical evidence for Portugal is consistent with a substitution hypothesis between direct investment abroad and trade, and consequently they detect a negative trade balance effect with the majority of countries in the sample, excepting Angola and, in a lesser extension, Spain.

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