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The global macroeconomics of NAFTA

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  • Joyce Manchester
  • Warwick Mckibbin

Abstract

Previous empirical studies of NAFTA have commonly used trade models that do not allow international capital flows to adjust to changes in regional trade arrangements such as NAFTA. This paper explores the dynamic implications of NAFTA with particular focus on the short-run and longer-run adjustment of financial capital. This adjustment affects the global allocation of physical capital and therefore changes the growth prospects for a country such as Mexico. Our results suggest that Mexico and the world economy gain more from NAFTA than merely a static reallocation of production possibilities. In the short run, the adjustment of financial capital affects nominal and real exchange rates. This adjustment is far more important for the short-term allocation of trade flows than partial equilibrium adjustment of trade based only on changes in long-term price differentials. Copyright Kluwer Academic Publishers 1995

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 6 (1995)
Issue (Month): 3 (July)
Pages: 203-223

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Handle: RePEc:kap:openec:v:6:y:1995:i:3:p:203-223

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: NAFTA; financial capital flows;

References

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  1. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 162-74, February.
  2. John Y. Campbell & N. Gregory Mankiw, 1991. "Permanent Income, Current Income, and Consumption," NBER Working Papers 2436, National Bureau of Economic Research, Inc.
  3. Gary Clyde Hufbauer & Jeffrey J. Schott, 1992. "North American Free Trade: Issues and Recommendations," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 71.
  4. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  5. Stern, R.M. & Deardorff, A.V. & Brown, D.K., 1992. "A US-Mexico-Canada Free Trade Agreement: Sectoral Employment Effects and Regional/Occupational Employment Realignments in the United States," Working Papers 315, Research Seminar in International Economics, University of Michigan.
  6. McKibbin, W.J. & Wilcoxen, J.P., 1992. "G-Cubec: A Dynamic Multi-Sector General Equilibrium Model of the Global economy (Quantifying the Cost of Curbing CO2 Emissions)," Papers 98, Brookings Institution - Working Papers.
  7. Haque, Nadeem U & Montiel, Peter, 1989. "Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 408-15, August.
  8. Gerard Adams, F. & Alanis, Mario & del Rio, Abel Beltran, 1992. "The Mexico-United States free trade and investment area proposal: A macroeconometric evaluation of impacts on Mexico," Journal of Policy Modeling, Elsevier, vol. 14(1), pages 99-119, February.
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Citations

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Cited by:
  1. Robinson, Sherman & Thierfelder, Karen, 2002. "Trade liberalisation and regional integration: the search for large numbers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), December.
  2. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2001. "The Impact of NAFTA on the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 125-144, Winter.
  3. McKibbin, W.J., 1996. "Quantifying APEC Trade Libralization: A Dynamic Analysis," Papers 122, Brookings Institution - Working Papers.
  4. Michael A. Kouparitsas, 1998. "Dynamic trade liberalization analysis: steady state, transitional and inter-industry effects," Working Paper Series WP-98-15, Federal Reserve Bank of Chicago.
  5. McKibbin, Warwick J. & Wilcoxen, Peter J., 2013. "A Global Approach to Energy and the Environment," Handbook of Computable General Equilibrium Modeling, Elsevier.
  6. McKibbin, W.J. & Salvatore, D., 1995. "The Global Economic Consequences of the Uruguay Round," Papers 110, Brookings Institution - Working Papers.
  7. Eduardo Fernández-Arias & Mark M. Spiegel, 1997. "North-South Customs Unions and International Capital Mobility," Research Department Publications 4060, Inter-American Development Bank, Research Department.
  8. Devarajan, Shantayanan & Robinson, Sherman, 2002. "The influence of computable general equilibrium models on policy," TMD discussion papers 98, International Food Policy Research Institute (IFPRI).
  9. Eduardo Fernández-Arias & Mark M. Spiegel, 1997. "Uniones aduaneras norte-sur y movilidad internacional del capital," Research Department Publications 4061, Inter-American Development Bank, Research Department.
  10. Kouparitsas, Michael A., 2001. "Should trade barriers be phased-out slowly? A case study of North America," Journal of Policy Modeling, Elsevier, vol. 23(8), pages 875-900, November.
  11. M. Ayhan Kose & Christopher M. Towe & Guy Meredith, 2004. "How Has Nafta Affected the Mexican Economy? Review and Evidence," IMF Working Papers 04/59, International Monetary Fund.

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