1 fdi , trade and growth , a causal link ?

This paper examines the causal relationships between inward direct investment, growth and trade in Indonesia for the period 1990 – 2004. We seek to establish whether there were strong/weak positive or negative associations between the presence of multinational enterprises and Indonesian exports and imports activity and to determine the causal links between the variables. We show that there are indeed causal links between FDI and trade, and that these are sensitive to growth effects, something that is generally ignored in the literature. JEL F21, F14, O11 Keywords, FDI exporting, growth, causality