Trade Liberalization and Investment in a Multilateral Framework

CEPR Discussion Paper Series No. 1410

Posted: 14 Feb 1997

See all articles by Bradley McDonald

Bradley McDonald

World Trade Organization (WTO)

Hakan Nordstrom

Swedish Board of Trade

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Date Written: June 1996

Abstract

This paper explores trade policy and investment linkages in a multicountry framework. This is done under alternative steady-state closure rules linking trade to consumption, production, and investment, and emphasizing the general equilibrium nature of capital accumulation mechanisms. When policy shocks are capital friendly, induced investment may be greater than suggested by current savings rates. As a result, multiplier-type analysis can be very misleading. The importance and direction of this magnification hinges critically on the sensitivity of savings rates with respect to real returns. As illustration, we offer a numerical assessment of the Uruguay Round, highlighting such linkages.

JEL Classification: F4, F13, F47

Suggested Citation

McDonald, Bradley and Nordstrom, Hakan and Francois, Joseph F, Trade Liberalization and Investment in a Multilateral Framework (June 1996). CEPR Discussion Paper Series No. 1410. Available at SSRN: https://ssrn.com/abstract=4647

Bradley McDonald

World Trade Organization (WTO)

154 Rue de Lausanne
CH-1211 Geneva 21
Switzerland

Hakan Nordstrom

Swedish Board of Trade ( email )

Sweden

Joseph F Francois (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

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