Preferential Trading and Capital Mobility

Arvind Panagariya and Sethaput Suthiwart-Narueput
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Sethaput Suthiwart-Narueput: World Bank

Eastern Economic Journal, 1996, vol. 22, issue 4, 485-489

Abstract: A key issue in the NAFTA debate was the effect of international capital mobility. This paper considers the implications of capital mobility in a three-good, three-country model of preferential trading. Capital mobility gives rise to foreign investment-induced trade creation in one country, but to both foreign investment-induced trade creation and diversion in the other. Nevertheless, we show that the net effect of capital mobility on welfare remains positive.

Keywords: NAFTA; Trade; Welfare (search for similar items in EconPapers)
JEL-codes: F15 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:22:y:1996:i:4:p:485-489

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