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A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments

Author

Listed:
  • Hiro Lee

    (Research Institute for Economics & Business Administration (RIEB), Kobe Universty, Japan)

  • Dominique van der Mensbrugghe

    (Development Prospects Group, The World Bank, USA)

Abstract

The theoretical literature on trade and foreign direct investment (FDI) indicates that they could be either substitutes or complements. The empirical evidence on U.S.-Japan and Asia-Pacific Economic Cooperation (APEC) countries suggests that trade and FDI exhibit a complementary relationship. In this paper, we employ a multi-region, multisectoral computable general equilibrium (CGE) model that incorporates FDI to evaluate the impact of APEC trade and investment liberalization on economic welfare and the interplay between FDI and trade adjustments.

Suggested Citation

  • Hiro Lee & Dominique van der Mensbrugghe, 2001. "A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments," Discussion Paper Series 119, Research Institute for Economics & Business Administration, Kobe University, revised Jul 2001.
  • Handle: RePEc:kob:dpaper:119
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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp119.pdf
    File Function: Revised version, 2001
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    References listed on IDEAS

    as
    1. George Verikios & Xiao-guang Zhang, 2004. "The Economic Effects of Removing Barriers to Trade in Telecommunications," The World Economy, Wiley Blackwell, vol. 27(3), pages 435-458, March.
    2. James R. Markusen & Thomas F. Rutherford & David Tarr, 2000. "Foreign Direct Investments in Services and the Domestic Market for Expertise," NBER Working Papers 7700, National Bureau of Economic Research, Inc.
    3. Lee, H. & Roland-Holst, D., 1992. "Cooperative Approaches to Shifting Comparative Advantage: the Case of Bilateral Trade Between the United States and Japan," Papers 92-16, California Irvine - School of Social Sciences.
    4. Terrie L. Walmsley, 1999. "Incorporating International Capital Ownership into the GTAP Model: Results for Asia-Pacific Trade Liberalisation," Centre of Policy Studies/IMPACT Centre Working Papers ip-72, Victoria University, Centre of Policy Studies/IMPACT Centre.
    5. Linda Low & Eric D. Ramstetter & Henry Wai-Chung Yeung, 1998. "Accounting for Outward Direct Investment from Hong Kong and Singapore: Who Controls What?," NBER Chapters,in: Geography and Ownership as Bases for Economic Accounting, pages 139-172 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lee, Hiro & Roland-Holst, David & van der Mensbrugghe, Dominique, 2002. "Emergent trilateralism in the Pacific Basin: How should China, Japan, and the United States respond to regional trade initiatives?," MPRA Paper 82606, University Library of Munich, Germany.
    2. Djoni Hartono & D.S. Priyarsono & Tien Dung Nguyen & Mitsuo Ezaki, 2007. "Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 200703, Department of Economics, Padjadjaran University, revised Mar 2007.
    3. Lakatos, Csilla & Walmsley, Terrie, 2012. "Investment creation and diversion effects of the ASEAN–China free trade agreement," Economic Modelling, Elsevier, vol. 29(3), pages 766-779.
    4. Lee, Hiro & Roland-Holst, David & van der Mensbrugghe, Dominique, 2004. "China's emergence in East Asia under alternative trading arrangements," Journal of Asian Economics, Elsevier, vol. 15(4), pages 697-712, August.
    5. Lee, Hiro, 2001. "General equilibrium evaluation of Japan-Singapore free trade agreement," MPRA Paper 82605, University Library of Munich, Germany.
    6. Marcel MĂ©rette & Evangelia Papadaki & Jorge Hernandez & Yu Lan, 2008. "Foreign Direct Investment Liberalization Between Canada and the USA: A CGE Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 36(2), pages 195-209, June.

    More about this item

    Keywords

    APEC liberalization; foreign direct investment; CGE model;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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