North-South Customs Unions and International Capital Mobility

Eduardo Fernandez-Arias and Mark Spiegel

No 4060, Research Department Publications from Inter-American Development Bank, Research Department

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.

Date: 1997-03
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Related works:
Journal Article: North-South customs unions and international capital mobility (1998)
Working Paper: North-South Customs Unions and International Capital Mobility (1997)
Working Paper: North-South customs unions and international capital mobility (1996)
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