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Trade Liberalization and Investment in a Multilateral Framework

Author

Listed:
  • Francois, Joseph
  • McDonald, Brad
  • Nordström, Håkan

Abstract

This paper explores trade policy and investment linkages in a multicountry framework. This is done under alternative steady-state closure rules linking trade to consumption, production, and investment, and emphasizing the general equilibrium nature of capital accumulation mechanisms. When policy shocks are capital friendly, induced investment may be greater than suggested by current savings rates. As a result, multiplier-type analysis can be very misleading. The importance and direction of this magnification hinges critically on the sensitivity of savings rates with respect to real returns. As illustration, we offer a numerical assessment of the Uruguay Round, highlighting such linkages.

Suggested Citation

  • Francois, Joseph & McDonald, Brad & Nordström, Håkan, 1996. "Trade Liberalization and Investment in a Multilateral Framework," CEPR Discussion Papers 1411, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1411
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    Citations

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    Cited by:

    1. Park, Innwon & Park, Soonchan & Kim, Sangkyom, 2010. "A Free Trade Area of the Asia Pacific (FTAAP): Is It Desirable?," MPRA Paper 26680, University Library of Munich, Germany.
    2. Nakgyoon Choi, 2010. "General Equilibrium Analysis of DDA Trade Liberalization : Assessment of Alternative Scenarios," Trade Working Papers 23109, East Asian Bureau of Economic Research.

    More about this item

    Keywords

    Trade and Capital Accumulation; Trade and Investment;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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