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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: https://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

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    7. Martin,Will & Winters,L. Alan (ed.), 1996. "The Uruguay Round and the Developing Countries," Cambridge Books, Cambridge University Press, number 9780521586016.
    8. 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.
    9. Walmsley, Terrie Louise, 1999. "Incorporating International Capital Ownership into the GTAP Model: Results for Asia-Pacific Trade Liberalisation," Conference papers 330886, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    11. 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.
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    Citations

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    Cited by:

    1. Djoni Hartono & Dominicus Savio Priyarsono & Tien Dung Nguyen & Mitsuo Ezaki, 2007. "Regional Economic Integration And Its Impacts On Growth, Poverty, And Income Distribution: The Case Of Indonesia," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 19(2), pages 138-153, July.
    2. 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.
    3. Marcel Mérette & 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.
    4. Peterson, Everett B. & Lee, Huey-Lin, 2005. "Incorporating Domestic Margins into the GTAP-E Model: Implications for Energy Taxation," Conference papers 331408, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Alpay, Savas, 2003. "How Can Trade Liberalization Be Conducive to a Better Environment?," Conference papers 331113, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. 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?," Conference papers 331060, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. 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.
    8. Lee, Hiro, 2001. "General equilibrium evaluation of Japan-Singapore free trade agreement," MPRA Paper 82605, University Library of Munich, Germany.
    9. Wang, Zhi & Gehlhar, Mark & Yao, Shunli, 2006. "Estimating Hong Kong Re-export Markups and Reconciling Trade Statistics from China, Hong Kong and Their Major Trading Partners - A Mathematical Programming Approach," Conference papers 331486, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    APEC liberalization; foreign direct investment; CGE model;
    All these keywords.

    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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