The moderating role of ASEAN-Korea FTA on the relationship between trade and South Korean outward FDI

Abstract

This study examines the determinants of outward Korean foreign direct investment (FDI) in ASEAN countries and the moderating role of the ASEAN-Korea FTA. We utilised the generalised least squares (GLS) with 170 country-year panel data obtained from 10 ASEAN countries and South Korea from 2000 to 2016. The trade volume between ASEAN countries and South Korea had a positive impact on outward FDI of South Korea, supporting the complementary relationship between trade volume and FDI. Also, the moderating effect of ASEAN-Korea FTA on the relationship between trade and FDI was found. It implies that the implementation of ASEAN-Korea FTA stimulates not only outward FDI of South Korea but also the effective economic integration among countries. Thus, we suggest that ASEAN-Korea FTA would be a good way to establish a cooperative framework among countries and improve these countries' economic welfare.