Exchange Rates (ER) (foreign currency / U.S. dollar)
GDP (U.S. million dollars)
Compensation Rates (C) (Foreign C / U.S. C)
Export Prices (XP) (U.S. dollar per metric ton)
Notes: All variables are log-transformed; therefore, the parameter estimates are elasticities. Values in parentheses are standard errors, *** 1% significance level ** 5% significance level
10% significance level
Empirical Results for Exports
Table 1 presents empirical results for the export equation. In regards to the FDI-export
relationship, empirical results in the export equation reinforce FDI results. Specifically,
empirical results in the export equation show that FDI positively influences exports and is highly
significant at the 1% level. The parameter estimate indicates that a 1% increase in FDI causes a
2.46% increase in exports.
Empirical results show that exchange rates and export prices negatively influence exports
and were significant at the 5% level. These results are consistent with our above hypotheses.
Additionally, we restricted the exchange rate and export price parameter estimates to be equal
based on the law of one price. Thus, as shown in Table 1, a 1% increase in either exchange rates
or export prices causes a 0.35% decrease in U.S. exports to FTAA countries. Unfortuately,
empirical findings for GDP in foreign countries had the wrong sign.