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Regional vs. Global Financing Strategies for U.S. MNEs

Listed author(s):
  • Joseph Daniels


    (Department of Economics, Marquette University)

  • Walid Hejazi


    (Rotman School of Management, University of Toronto)

  • Marc von der Ruhr


    (Department of Economics, Saint Norbert College)

Despite declining in 2001, foreign direct investment (FDI) surged during the 1990s. As a result, current levels of FDI flows are triple their 1990 levels. It is well documented in the literature that FDI occurs in large part among countries that are geographically close. It is also well established that the NAFTA had a significant impact on both U.S. FDI flows and hence FDI stocks. In addition, tax policies and tax treaties have been shown to be important drivers of U.S. FDI. The analysis presented in this paper confirms these earlier results. We extend the analysis, however, to show that tax treaties have a significant impact on financing patterns of U.S. MNE activities abroad. Based on these results, we argue that bilateral tax treaties should be an important part of trade agreements between the United States and Latin American partners in anticipation of a Free Trade Agreement of the Americas (FTAA).

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Paper provided by Marquette University, Center for Global and Economic Studies and Department of Economics in its series Working Papers and Research with number 0511.

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Length: 30 pages
Date of creation: Jun 2005
Publication status: Published in the North American Economic and Financial Integration: Research in Global Strategic Management, Vol(10), 2004, A. Rugman, ed., Oxford: Elsevier Ltd., Publishing, pages 49-66
Handle: RePEc:mrq:wpaper:0511
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  1. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
  2. Rosanne Altshuler & Harry Grubert & T. Scott Newlon, 2000. "Has U.S. Investment Abroad Become More Sensitive to Tax Rates?," NBER Chapters,in: International Taxation and Multinational Activity, pages 9-38 National Bureau of Economic Research, Inc.
  3. Bruce A. Blonigen & Ronald B. Davies, 2002. "Do Bilateral Tax Treaties Promote Foreign Direct Investment?," NBER Working Papers 8834, National Bureau of Economic Research, Inc.
  4. Robert E. Lipsey, 1993. "Foreign Direct Investment in the United States: Changes over Three Decades," NBER Chapters,in: Foreign Direct Investment, pages 113-172 National Bureau of Economic Research, Inc.
  5. Bruce A. Blonigen, 2005. "The Effects of," World Bank Economic Review, World Bank Group, vol. 19(3), pages 407-424.
  6. Walid Hejazi & Marc von der Ruhr, 2003. "US firms in world finance," Chapters,in: Alliance Capitalism for the New American Economy, chapter 7 Edward Elgar Publishing.
  7. Horst Raff & Marc von der Ruhr, 2007. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(3), pages 299-321.
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