International Trade and Investment by Multinational Firms under Uncertainty

Takao Itagaki

The Manchester School of Economic & Social Studies, 1987, vol. 55, issue 4, 392-406

Abstract: This paper investigates the consequences of exchange-rate uncertainty on international trade, investment, employments of labor, and product ion by competitive multinational firms. It is shown to be important w hether and how international trade is undertaken. The paper demonstra tes that uncertainty may stimulate the foreign activities by risk-ave rse multinational firms, if international trade is undertaken only by these firms. It also shows that uncertainty may or may not discourag e foreign production in the absence of trade, while it definitely dis courages foreign production if international trade is undertaken by c ompetitive risk-neutral arbitragers. Copyright 1987 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:55:y:1987:i:4:p:392-406

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