A Dynamic Panel Analysis of French Exports and Outward FDI in Selected Mediterranean Countries

This article investigates the relationship between exports and FDI in the Mediterranean area using gravity analysis. Due to the controversial literature, the theory strongly supports the substitutional hypothesis, meanwhile, the complementary case supported empirically, others doubt that the later relationship is spurious statistical complementarity relationship. Discovering the relationship nature reflects essentially on the local and foreign macroeconomic indicators and hence the policy making. Therefore, we examine this hypothesis by using the most recent static and dynamic panel data analysis, which are H-T model, FEVD and DPD system. This application of dynamic method in the subject can avoid several econometric problems that faced researches before. We formulate an original model of two dynamic gravity equations intersected transversely to detect the relationship between the variables. The dynamic analysis shows a clear-cut substitution significant relationship between the variables. The other determinants show a significant importance of explaining both indicators.