Quantitative Restrictions and Foreign Investment in a Monetary Economy
AbstractThis paper examines the welfare effect of foreign investment under quantitative restrictions for a host country with a cash-in-advance constraint. This constraint results in a divergence between the consumer virtual prices and the world prices. If the cash required for purchasing exportable goods exceeds that of the importable, additional foreign investment can widen the price divergence and, thus, reduce welfare. This result is contrary to the conventional view that foreign investment is non-immiserizing under quantitative restrictions. On the other hand, if the cash requirement is larger for buying importable goods, foreign investment can still promote welfare.
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Bibliographic InfoArticle provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.
Volume (Year): 1 (2002)
Issue (Month): 1 (April)
foreign investment; quantitative restrictions; cash in advance;
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
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