A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments

Kobe U. Research Institute for Economics & Business Admin, Discussion Paper No. 119

29 Pages Posted: 5 Apr 2005

See all articles by Hiro Lee

Hiro Lee

Osaka University; Osaka University - Osaka School of International Public Policy (OSIPP)

Dominique van der Mensbrugghe

World Bank

Date Written: July 2001

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 APEC countries suggests that trade and FDI exhibit a complementary relationship. In this paper, we employ a six-region applied general equilibrium model that incorporates FDI to evaluate the impact of APEC trade and investment liberalization on output and the interplay between FDI and trade adjustments. The preliminary results suggest that FDI liberalization would bring about greater benefits to most of the APEC economies than trade liberalization. In the manufacturing sector, trade and FDI are found to be complements in the APEC regions.

Keywords: APEC liberalization, foreign direct investment, CGE model

JEL Classification: F13, F15, F21, O53

Suggested Citation

Lee, Hiro and van der Mensbrugghe, Dominique, A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments (July 2001). Kobe U. Research Institute for Economics & Business Admin, Discussion Paper No. 119, Available at SSRN: https://ssrn.com/abstract=685146 or http://dx.doi.org/10.2139/ssrn.685146

Hiro Lee (Contact Author)

Osaka University ( email )

1-31 Machikaneyama-cho
Toyonaka
Osaka, 560-0043
Japan
81-6-6850-5619 (Phone)
81-6-6850-5656 (Fax)

HOME PAGE: http://www.osipp.osaka-u.ac.jp/en/

Osaka University - Osaka School of International Public Policy (OSIPP) ( email )

Dominique Van der Mensbrugghe

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0052 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/dvandermensbrugghe

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
163
Abstract Views
1,528
Rank
311,727
PlumX Metrics