North-South Customs Unions and International Capital Mobility
22 Pages Posted: 20 Apr 2011
Date Written: March 1997
Abstract
This paper examines the implications of a North-South trade accord where investments in the Southern partner nation exhibit country risk. Our analysis demonstrates that North-South trade accords can serve as credibility-enhancing mechanisms that induce additional foreign capital inflows into Southern partner nations. The presence of sovereign risk changes the tradeoffs between trade creation and diversion, enhancing the potential for regional trade accords to increase the welfare of accord members.
Suggested Citation: Suggested Citation
Fernandez-Arias, Eduardo and Spiegel, Mark M., North-South Customs Unions and International Capital Mobility (March 1997). IDB Working Paper No. 282, Available at SSRN: https://ssrn.com/abstract=1815970 or http://dx.doi.org/10.2139/ssrn.1815970
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