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Regional Integration and Foreign Direct Investment

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  • Blomström, Magnus
  • Kokko, Ari

Abstract

This paper deals with the investment effects of regional integration agreements and discusses how such arrangements may affect inward and outward foreign direct investment (FDI) flows in the integrating region. After setting up a conceptual framework for the analysis, we provide three studies focusing on different kinds of regional integration: North-North integration (Canada joining CUSFTA), North-South integration (Mexico’s accession to NAFTA), and South-South integration (MERCOSUR). The main conclusion of the study is that the responses to an integration agreement largely depend on the environmental change brought about by the agreement and the locational advantages of the participating countries and industries. Moreover, the findings suggest that the most positive impact on FDI has occurred when regional integration agreements have coincided with domestic liberalization and macroeconomic stabilization in the member countries.

Suggested Citation

  • Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1659
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    More about this item

    Keywords

    FDI; MNCs; Regional Integration;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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