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Preferential Trading and Capital Mobility

Author

Listed:
  • Arvind Panagariya

    (University of Maryland)

  • Sethaput Suthiwart-Narueput

    (World Bank)

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.

Suggested Citation

  • Arvind Panagariya & Sethaput Suthiwart-Narueput, 1996. "Preferential Trading and Capital Mobility," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 485-489, Fall.
    • Handle: RePEc:eej:eeconj:v:22:y:1996:i:4:p:485-489
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume22/V22N4P485_489.pdf
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    Cited by:

    1. Priya Ranjan, 2006. "Preferential trade areas, multinational enterprises, and welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 493-515, May.

    More about this item

    Keywords

    NAFTA; Trade; Welfare;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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