Abstract
The main purpose of this study is to investigate the determinants and relationships among foreign direct investment, import and export of four manufacturing industries between Taiwan and Mainland China. First, the simultaneous equation model is constructed to detect the determinants of foreign direct investment, import and export by applying the panel data from January 1993 to December 2007. The fixed effect model is estimated and has indicated that foreign direct investment, import and export are positively interacted one another between Taiwan Mainland China. Furthermore, the study tries to explore linkage effects of foreign direct investment, import and export relationship between Taiwan and Mainland China. By using panel co-integration analysis and fully modified OLS (FMOLS) to resolve the long-term relationship of co-integration vector, the result shows there is a long-term co-movement among foreign direct investment, import and export between Taiwan and Mainland China. Based on the estimated results of panel vector error correction model (Panel VECM), it points out that a possible space for market and/or economic integration between Taiwan and Mainland China. Basically, the empirical results of this study would provide useful information for firm to managerial strategy and policy-making for government agent.
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