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Martens Trade FDI
Martens Trade FDI
+
=
+
where CAB is the current account deficit (which is equal to net foreign savings), GDP
is gross domestic product, IM is the volume of imports, EX is the volume of exports,
FSO
is the elasticity of FDI relative to the openness indicator (expression in square
brackets) and all variables with the superscript 0 are base year values. Alternatively,
37
The high elasticity value of 2.000 was found for Pakistan where, it should be remembered, FDI was
restricted to FDI going to manufacturing (Hakro and Ghumro, 2007)
38
On the basis of the surveyed studies, it is not possible to provide a separate range for the North African
countries since the latter, when included, were aggregated with the other African countries.
16
the current account deficit in the expression above can be replaced by FDI and the
rest of the current account deficit being modeled as a fixed share of GDP:
( )
( )
0
0 0 0 0
/
/
FSO
t t t
t t
IM EX XS
FDI
FDI GDP
GDP IM EX XS
+
=
+
( )
( )
0 0
0 t t t
CAB FDI
CAB FDI GDP
GDP
=
17
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