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This paper investigates the relationship between F D I and trade in the Asia-Pacific economies by examining the bilateral flows of trade and F D I in a crosssectional study. The estimation results based on the gravity model show a sig nificant and positive relationship between trade and FDI, implying a comple mentary relationship. Estimated coefficients also imply that trade has a larger impact on F D I flows than such investment has on bilateral trade flows. It is evident that the distance between the home country and the host country is a significant resistance factor for tradebut not for FDI. The estimation results
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Stone et al. (2000) studied this question.
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