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North-South customs unions and international capital mobility

  • Fernandez-Arias, Eduardo
  • Spiegel, Mark M.

This paper examines the implications of a North-South trade accord where investments in the Southern partner nation exhibit country risk. Our analysis demonstrates that North-South trade accords can serve as credibility-enhancing mechanisms that induce additional foreign capital inflows into Southern partner nations. The presence of sovereign risk changes the tradeoffs between trade creation and diversion, enhancing the potential for regional trade accords to increase the welfare of accord members.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 46 (1998)
Issue (Month): 2 (December)
Pages: 229-251

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Handle: RePEc:eee:inecon:v:46:y:1998:i:2:p:229-251
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Thomas, Jonathan & Worrall, Tim, 1990. "Foreign direct investment and the risk of expropriation," Kiel Working Papers 411, Kiel Institute for the World Economy.
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  11. Safadi, Raed & Yeats, Alexander, 1993. "The North American Free Trade Agreement (NAFTA) : its effect on South Asia," Policy Research Working Paper Series 1119, The World Bank.
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