Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19278
Authors: 
Otto, Alkis Henri
Year of Publication: 
2004
Series/Report no.: 
HWWA Discussion Paper 306
Abstract: 
We study the effects of FDI and increasing multinational activity utilizing a macroeconomic two-sector model of the small open economy with flexible exchange rates and perfect capital mobility. The focus is on horizontal greenfield investment and its impact on production, exchange rates, trade, and welfare. In the host country, an increase in multinational activity harms the established industries. Nevertheless it increases welfare. In the home country, an increase in multinational activity lowers domestic output of the established industries too and, thereby, decreases welfare.
Subjects: 
Foreign Direct Investment
Multinational activity
Welfare effects
Macroeconomic effects
JEL: 
F21
F41
Document Type: 
Working Paper

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