Multinational Activity in a Macroeconomic Model of the Small Open Economy
We study the effects of FDI and increasing multinational activity utilizing a macroeconomic two-sector model of the small open economy with flexible exchange rates and perfect capital mobility. The focus is on horizontal greenfield investment and its impact on production, exchange rates, trade, and welfare. In the host country, an increase in multinational activity harms the established industries. Nevertheless it increases welfare. In the home country, an increase in multinational activity lowers domestic output of the established industries too and, thereby, decreases welfare.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: Neuer Jungfernstieg 21, D-20347 Hamburg|
Web page: http://www.econstor.eu/handle/10419/20
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- Robert E. Lipsey & Robert C. Feenstra & Carl H. Hahn & George N. Hatsopoulos, 1999.
"The Role of Foreign Direct Investment in International Capital Flows,"
in: International Capital Flows, pages 307-362
National Bureau of Economic Research, Inc.
- Robert E. Lipsey, 2000. "The Role of Foreign Direct Investment in International Capital Flows," NBER Working Papers 7094, National Bureau of Economic Research, Inc.
- S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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