The causal relationship between domestic and outward foreign investment: evidence for Italy

Abstract

This article examines the impact of outward foreign direct investment (OFDI) on domestic investment by applying cointegration techniques to macroeconomic time series data for Italy. We find that OFDI has negative short-run and positive long-run effects on domestic investment. Furthermore, our empirical results show that the long-run causality is bi-directional, suggesting that increased OFDI is both a cause and a consequence of increased domestic investment.