The impact of foreign direct investments on the Dutch international trade

Foreign direct investment and international trade, two important features in the economy that are nearly inseparable in the literature of international economics. This paper attempts to find the kind of relationship FDI and international trade share with a specific focus on the Dutch economy and its trading partners. It also investigates a mechanism involving export risk in order to find a potential driver of this correlation. The research employs Dutch data over the period 2000-2017 covering almost 190 trading partners. Evidence shows that increasing foreign investments induces the growth in international trade indicating a complementary effect where there is also proof of export risk forming an essential driver in this mechanism.