RESTRICTED
WORLD TRADE WT/WGTI/W/8/Add.3
24September 1997
ORGANIZATION(97-3934)
Original: English Working Group ontheRelationship
between Trade andInvestment
IMPLICATIONS OFTHE RELATIONSHIP BETWEEN TRADE AND INVESTMENT
FOR DEVELOPMENT AND ECONOMIC GROWTH
Work Undertaken inOther Intergovernmental Organizations
Addendum
1. Atitsmeeting of2and3June1997, theWorking Group requested theWTO Secretariat to
prepare apaper which would present theresults ofwork undertaken inother intergovernmental
organizations onthesubjects covered byItemIoftheChecklist ofIssues Suggested forStudy
(WT/WGTI/M/1, paragraph 11).Pursuant tothisrequest, theSecretariat invited UNCTAD andother
intergovernmental organizations working inthisareatoprovide asummary description ofwork carried
outonthese subjects.
2. Thisaddendum reproduces thecontribution from theIMF.WT/WGTI/W/8/Add.3
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TRADE AND INVESTMENT FOR GROWTH AND DEVELOPMENT -ASURVEY
OFFUND LITERATURE
Thefollowing noteprovides abriefsurvey ofFund publications ontrade andinvestment and
related issues. Itlooks atthelinkages between tradeandinvestment, discussing aspects oftrade, growth,
andinvestment. Itcovers matters relating totechnological transfer andcompetitiveness, aswellas
reviewing regional andcountry experiences.
1. Linkages oftrade andinvestment
Trade andinvestment decisions ofcorporations toinvest overseas areclosely integrated. IMF
(October 1995) investigates theliterature onwhether foreign direct investment (FDI) andinternational
trade arecomplements orsubstitutes. Itconcludes thatthebulkoftheevidence points toward a
complementary relationship rather thanasubstitutive one.Outward FDIseems tobepositively linked
totrade expansion. Bothexports andimports appear toexpand asFDIgrows. Trade expansion is
likely tobeintra industry, thatis,exports andimports willtendtogrow within sectors andnot
necessarily across sectors.
Investment decisions canbeeither factor-driven (access tomaterials, technology, lower-cost
labour) orpolicy-driven (investments directly influenced bynational policies), thelatter often being
asecond-best response toimpediments orincentives thatleadtoaninefficient allocation ofresources.
Kelly andMcGuirk (1992) highlight thatthegrowing importance ofFDIinachieving andmaintaining
international competitiveness inworld markets, andinthetransfer oftechnology, hasbrought tothe
forethewide range ofpolicies thatcandistort trade andinvestment flows andinhibit competition.
Theyconsiderdomesticpoliciesaffectinginvestmentflowsparticularlyastheyinhibitforeigninvestment
andcompetition, through structural impediments, including cross-corporate ownership relations,
differences among countries inmerger andacquisition laws, prohibitions oninvestment insensitive
sectors, restriction ontherightofestablishment thateffectively limits investments inservice sectors,
andstrategic policies thatraisebarriers toentry inresearch consortia orotherwise limitthetransfer
oftechnology. Alsoconsidered aretrade measures thatdistort theformandextent ofinvestment and
trade, including voluntary export restraints, anti-dumping andcountervailing measures, localcontent
rules, rules oforigin, aswellasregional trade agreements.1
Inrecognizing thatsuchmeasures cantiltthe“playing field”andbecome agrowing source
offriction among trade partners, there isincreasing pressure ongovernments toseekregulatory
convergence inareas affecting trade andinvestment decisions. Although multinational corporations
carry outbothalarge portion oftheworld ’strade anddirect investment, theinternational legal
framework fortrade isdetailed, compared withthatfordirect investment- related activity. This
asymmetry haslongbeenobserved byscholars, whohavesuggested thatthere might bebenefits to
extending themultilateral trade rulestocover direct investment andallied activities. Kirmani, et.al.
(1994), inreviewing thepost-Uruguay round agenda ontrade-related investment policies, suggests
thatanyfuture multilateral discussions oninvestment willneedtoaddress twotypes ofpolicies, those
thatrestrict FDIthrough rulesonrights ofestablishment, discriminatory treatment offoreign investors,
andonerous standards ofperformance, andthose policies thatserve toattract investors away from
other locations resulting ininefficient useofglobal resources. Theforum inwhich future rules are
negotiated would depend ontheneedforenforceable rules oninvestment aswellasthenumber of
countries willing toundertake greater obligations onsuchrules.
1Leidy (1996) reviews anti-dumping andcountervailing dutyprocedures using empirical datafrom theUnited
States, andfound thatpressure forprotection under these measures have tended toadvance during periods of
macroeconomic weakness andreceded during periods ofmacroeconomic strength.WT/WGTI/W/8/Add.3
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Graham (1995) surveys thepolicy issues thatfigure incurrent efforts toputinternational direct
investment under theaegis ofmultilateral trading rulesandsuggests thatinthenearfuture "some sort
ofmultilateral agreement oninvestment ”should benegotiated. Issues ofbothsubstance andvenues
arediscussed. Consideration ofpossible venues includes theWTO, OECD, andWorld Bank. He
argues thatanyfuture multilateral agreement oninvestment should include principles pertaining to
transparency, rightofestablishment, national treatment andinvestor protection. Theaimwould be
todevelop more neutral andtransparent tradeandinvestment rulestoensure thatinvestment andtrade
decisions areunaffected bytheexistence ofnational borders, thereby maximizing theefficiency gains
fromanopentradeandinvestment regime. Vocke (1997) alsoinrecognition thatthesubstantial increase
inFDIinrecent years hastriggered adiscussion ofauniform treatment ofinvestment ininternational
law,surveys contributions tothemultilateral investment framework derived fromtheWTO agreements
ontrade liberalization andthebroader investment rules ascurrently being discussed attheOECD.
Heconcludes thattheWTO agreements tendtorestrict theirfocus onselective aspects, andtherefore
abroader investment regime isneeded toprovide amore neutral incentive framework forinvestment
liberalization andtopromote efficient international investment flows.
2. Trade andgrowth
Open markets intandem withsound macroeconomic, environmental andappropriate structural
andsocial policies areameans tosustainable growth. Liberal trade policies, through theireffects on
relative prices andresource allocation andexposure toforeign competition, improve efficiency, promote
export growth, andenhance aneconomy ’scapacity forefficient adaptation tochanging circumstances.
Kirmani, et.al.(1994) provide areview oftheliterature onthedynamic gains fromtrade ongrowth.
Thenewgrowthmodels(endogenousgrowththeory)specifyseveralchannelsthroughwhichinternational
trade canleadtoapermanent increase ineconomic growth viatechnical change, thereby providing
apotentiallyimportantconceptualfoundationforempiricalstudies.Insum,whiletherearemanycaveats
attached toboththeempirical literature aswellasthenewtheoretical endogenous growth literature,
much additional work needs tobedoneincombining thetwo;theempirical evidence andeconomic
theory generally support thelong-held viewthatthere isastrong linkbetween international trade and
economic growth.
IMF(October 1995) supports theargument andfindsthattheadoption ofmore liberal exchange
andtraderegimes haveenabled many developing countries toexpand substantially bothintraregional
trade and,more recently, trade withindustrial countries. Theremarkable performance ofmany east
Asian countries andsome Latin American countries thathavepursued outward-oriented policies over
thepasttwodecades clearly illustrates thebenefits ofmore opentrade policies. Datashow thatthe
group ofcountries thatsubstantially liberalized theirtradeovertheperiod 1988-92 experienced asharp
pick-up inbothexports andimports andanoticeable increase intheirabsolute income levels (IMF,
May1997).
Diversification oftheexport base, especially anexpanded manufacturing sector, hasreduced
vulnerabilitytoexternalshocksformanydevelopingcountries.Thechangingcompositionofdeveloping
country exports hasbeenaided bytheremoval ofdistortions indomestic markets andreductions in
tradebarriers, butitalsoreflects anunderlying shiftinthecomparative advantage ofmany developing
countries toward manufacturing.
3. Investment andgrowth
Open trade andcapital account policies notonlyallow acountry toexploit itscomparative
advantages inproduction, buttheyalsopromote theimportation oflowest-cost products, often with
embedded advanced technology (seesection 4below). Trade alsoallows acountry toemploy alarger
variety ofintermediate goods andcapital equipment thatenhance theproductivity ofitsownresources.WT/WGTI/W/8/Add.3
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Risinginvestment(bothforeignanddomestic),coupledwithlowwagecosts,havemadesomedeveloping
countries highly competitive intheproduction ofmany manufactured goods. Thisisparticularly so
insome oftheAsian countries where highdomestic saving hasbeenreflected inasharp increase in
thestock ofcapital.
IMF(October 1994) assesses theexternal anddomestic factors thathaveaccounted forthe
variationincapitalflows.Inadditiontomacroeconomicstabilityandoutward-orientedpolicies,financial
deregulation, privatization andtaxreforms havereduced distortions andgenerally ledtoimproved
supply conditions, thereby enhancing thepotential returns onlong-term investment. Many developing
counties thathaveliberalized trade policies havebenefited from large flows ofFDI. Theability to
import bothcapital goods andintermediate inputs hasinfluenced thewillingness offoreign investors
toengage inlong-term investments. Regional trade arrangements havealsobeenhelpful inreducing
trade barriers andproviding foreign investors withassurances ofcountries ’longer-term commitment
tostable trading conditions. Forexample, capital flows toMexico intheearly1990s wereundoubtedly
stimulated bytheinitiation ofnegotiations oftheNorth American FreeTrade Agreement (NAFTA).
Indescribing andevaluating thedesign ofFund adjustment programs, Susan Schadler et.al.
(1993, 1995) found thatallcountries pursued structural reforms andtypically fastest andfirstwere
inexchange, trade, financial andpriceliberalization. They alsonoted thattheefficiency ofinvestment
tohaveimproved owing tobetter structural andfinancial policies.
Borensztein, et.al.(1994) testtheeffects ofFDIoneconomic growth inacross-country
regression framework onFDIflows from industrial countries, to69developing countries, overthe
lasttwodecades. Their results suggest thatFDIisanimportant vehicle forthetransfer oftechnology
contributing relatively more togrowth thandomestic investment. Huang andShirai (1994) argue that
capital doesnotreadily flowfromrichtopoorcountries; theyidentify amore dynamic process which
theycategorise intothree phases. Initially, FDIshows asluggish increase followed byaperiod of
considerable fluctuation, before reaching thestage ofrapid growth. Theauthors conclude thattohelp
shiftthedeveloping country economies fromsmall-scale FDItorapidly expanding FDI,international
organizations andgovernments insource countries canplayacrucial roleinpromoting thedisclosure
ofinformation andbyinitiating orfinancing jointventures.
4. Investment andtechnological transfer
Globalizationofinvestmentandproductionhasfacilitatedthetransferoftechnologyandindustry
todevelopingcountries,aprocessthatincreasesthetradeandwelfaregainsfromspecialization,provided
thatcountries adapt totheongoing structural changes intheworld economy. Inanother paper byShirai
andHuang (1994), theyreview howindustrialization affects thestructure ofinternational trade, and
using actual tradedatabetween Japan andIndonesia, andKorea, show thatintra-industry tradeincreases
when product quality improvement emerges indeveloping countries andwhen differences inrelative
factor endowments between adeveloped andadeveloping countries declines. Bayoumi (1996) examines
thegrowth-promoting rolesofR&D, international R&D spillovers, andtrade, andfindsthatacountry
canraiseitstotalfactor productivity byinvestment inR&D, butcanboost productivity further by
tradingwithothercountriesthathavelarge“stocksofknowledge”fromtheircumulativeR&Dactivities.
Their simulations suggest thatR&D, R&D spillovers, andtradeplayimportant rolesinboosting growth
inindustrial anddeveloping countries.
5. Competitiveness andtrade
Devaluation isanintegral partofadjustment inmany developing countries butcanonlyreduce
trade imbalances ifittranslates intoarealdevaluation andiftrade flows respond torelative pricesWT/WGTI/W/8/Add.3
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inasignificant andpredictable manner. Reinhart (1994) re-examines therelationship between relative
prices andimports andexports inasample of12developing countries. Forthemajority ofcases,
relative prices arefound tobesignificant determinants ofthedemand forimports andexports, and
although relative prices haveapredictable andsystematic impact ontrade, elasticities tendtobelow,
and,inmostinstances,wellbelowunity.Thisresultsuggeststhatlargerelativepriceswingsarerequired
tohaveanappreciable impact ontrade patterns. Aswould beexpected, industrial country income
elasticities arewellabove theirdeveloping country Asian andLatin American counterparts, suggesting
thatinascenario ofbalanced growth thedeveloping country tradebalance should improve. However,
thisresult doesnotholdforAfrica, most likely because ofthehighprimary commodity content of
African exports.
Inarelated exercise, Helbing andTurtelboom (1995) analyze thebehaviour ofrealexchange
rates, thetrade balance andthenetforeign assetposition oftheUnited States using anintertemporal
optimizing model, andsuccessfully track thedynamics oftrade balances andnetforeign assets.
Giovannetti andSamiei (1995) examine theresponse oftradeflows andcurrent accounts tofluctuations
inexchange rates, looking atdatafortheUnited States, Japan, andGermany, andfound evidence of
limited exchange pass-through anddiscontinuous adjustment toexchange rateshocks.
Dhonte, et.al.(1994) highlight theliberalization ofexchange systems insub-Saharan African
countries. Three groups areidentified: theCFAcountries, Nigeria, andagroup of“other”countries.
Thefirstgroup isnotably characterized byaweaker output performance (prior tothedevaluation).
Theother groups achieved abetter balance between terms oftrade andrealeffective exchange rate
developments andimproved growth record. Consequently, thedevaluation oftheCFA franc is
considered torepresent amajor adjustment, which, ifsupported byappropriate policies, should
substantially increase thedomestic savings andinvestment ratios.
Marsh andTodarick (1994) discuss fiveindicators ofcompetitiveness: realexchange ratesbased
onconsumer price indices, export unitvalues ofmanufacturing goods, therelative price oftraded to
non-traded goods, normalized unitlabour costsinmanufacturing, andtheratioofnormalized unitlabour
coststovalue-added deflators inmanufacturing. Theydiscuss howeachofthesemeasures isassociated
withchanges inacountry ’sbalance oftrade ingoods andnon-factor services andexamines the
relationship among theindicators. They conclude thateachindicator ofcompetitiveness possesses,
tosome extent, shortcomings andnosimple indicator provides anunambiguous assessment of
competitiveness. Reliance oncompetitiveness indicators therefore should onlyform apartofany
assessment ontheappropriateness ofacountry ’sexchange rate,given themany limitations inherent
intheconstruction ofthese indicators. Therefore, theysuggest thatcompetitiveness indicators should
beusedinconjunctionwithotherindicatorstoobtainanassessmentofcompetitivenessthatisascomplete
aspossible.
6. Regional andcountry experiences
Reviewing experience ofadjustment policies ineight countries (Bangladesh Chile, Ghana,
India, Mexico, Morocco, Senegal andThailand ),Goldsbrough etal(1996) findthreecrucial aspects
ofstructural policies: timeliness, sustainability andconsistency. Even inregions thathavebeenmost
severely affected bysome deteriorating terms oftrade, suchassub-Saharan Africa, countries thathave
acted toimprove theircompetitiveness andimplement structural adjustment measures havedonebetter
thanothers interms ofsaving, investment andpercapita GDP growth. A“coreset”ofreforms is
inevitably country-specific, butkeycomplementarities thatemerged inanumber ofcountry casesinclude
trade reforms.
Sarel (1995) examines EastAsialooking attheroleofhighinvestment ratesandstrong export
orientation aspossible engines ofgrowth. Hefound thathighinvestment rates(inthecaseofKorea,WT/WGTI/W/8/Add.3
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Singapore andTaiwan Province ofChina )andthehighdegree ofopenness (inthecaseofKorea
andTaiwan Province ofChina) wereeconomic features thatevolved intheseeconomies onlygradually,
accompanying, rather thanpreceding, theprocess ofeconomic growth.
IMF(October 1994) reviews FDIinChina andlegislative changes thatallowed FDItogrow.
China hasbegun torelymore heavily onFDIandhascorrespondingly reaped important benefits,
particularly bybroadening thestructure ofChinese output. FDIinthemanufacturing sector isseen
tohavehelped China toadvance technologically, raiseproductivity, andgenerate external demand
forChineseproductsbyenhancingcompetitiveness.Inaddition,furthergrowthofFDIinmanufacturing
intheearly 1990s isconsidered animportant factor behind therecent highratesofeconomic growth.
HuandKhan(1996)arguedthatmarket-orientedreforms,especiallyinthenon-statesector,havebrought
about adramatic expansion inforeign trade andforeign direct investment.
BayoumiandLipworth(1997)examinetherelationshipbetweenJapaneseFDIoutflows,domestic
andforeign fixedinvestment, andtheexchange rate. They findthataggregate FDIoutflows havebeen
drivenbyinvestmentinJapanandtheexchangerate,whilethegeographicdistributionofsuchinvestment
hasbeeninfluenced byforeign economic conditions. FDIoutflows werefound tohaveatemporary
impact onexports butapermanent effect onimports.
Bisat, et.al.(1996), inexamining investment andgrowth intheMiddle EastandNorth Africa
(MENA), found astable macroeconomic environment, accelerating structural reforms, investing more
effectively inthesocial sector, andstrengthening theinstitutional baseaskeyelements. Importantly,
highinvestment/high growth MENA economies were identified asbeing relatively more integrated
intheglobal economy. Their ratiooftotaltradetoGDPwascorrespondingly larger thanthatofother
country groupings. These countries haveeither already achieved lowaverage tariffratesorcommitted
toschedules ofdeclining tariffs andhavebeenmore successful inattracting inflows ofFDIandportfolio
investment.
Havrylyshyn andKunzel (1997) assess thatthebilateral agreement toliberalize tradebetween
theEuropean Union andArab countries willprovide amore competitive environment. Thebenefits
ofincreased competitiveness areexpected tospurimprovements inefficiency andstimulate foreign
investment togenerate higher growth. Thepaper makes useofanintra-industry trade (ITT) index
asanindicator ofthedegree ofindustrial specialization tostudy Arab countries ’ability tocompete
inamore opentrade setting. Thepaper argues, however, foramore multilateral approach totrade
liberalization andsuggests thatmarket-oriented policies could yield significant gains intheform of
increased specialization andhigher ITTlevels.
Thereintegration oftransition countries intotheworld economy isanessential element of
theirtransformation process. IMF(May 1995, 1997) assesses theroleoftrade liberalization, private
financing andFDIinthetransformation process. Since thebeginning ofthetransformation, countries
havemade substantial progress inreorienting trade andhavestarted theprocess ofreintegration with
international financial markets. Leidy andIbrahim (1996) broadly tracetheevolution oftradepolicies
intheBaltic countries, Russia, andtheother countries oftheformer Soviet Union. Theyfound avaried
response where afewcountries moved quickly toadopt ahighly liberal trading system compared with
others where reform hasbeenhesitant anduneven. Thepaper points toanumber ofreasons forthe
varied result, including theroleofoutput declines andhighlevels ofunemployment, inappropriate
macroeconomic polices, insufficient reforms inother areas, domestic orregional armed conflicts and
interest group behaviour.
Hadjimichael, et.al.(1994, 1996) empirically investigates thefactors thatcanexplain the
diversity intheperformance ofprivate saving andinvestment among countries insub-Saharan Africa.
They found thatsubjecting theeconomy toincreased external competition hadapositive impact onWT/WGTI/W/8/Add.3
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productivity growth andefficiency intheuseofresources. Trade andexchange reforms proved
particularly complementary toenhancing investment andgrowth. Chanda 's(1996) paper studies the
implications oftheUruguay Round forKenya ’sowntraderegime anditsexternal trading environment.
Although theanalysis indicates thatKenya didnotundertake significant liberalization commitments
under theUruguay Round, there areseveral positive effects onKenya ’sexternal trading environment
duetomost-favoured nation tariff cuts,erosion ofpreference margins, andchanges infoodprices.
7. Further determinants togrowth
Inaddition totheabove literature, thefollowing Fundworkinvestigates determinants togrowth:
Cashin andLoayza (1995) examine thedeterminants ofgrowth fornineSouth Pacific countries
during theperiod 1971-93 using theanalytical framework oftheSolow-Swan neoclassical growth model.
They found thatthespeed ofconvergence ofSouth Pacific countries totheirrespective steady-state
levels ofper-capita GDP, isestimated atarelatively fast4percent peryear.
Cashin andSahay (1995) examine thegrowth experience oftwenty states ofIndia during the
period 1961-91, using aneoclassical growth model. They found evidence ofabsolute convergence
--initially-poor states didgrow faster thantheirinitially-rich counterparts.
Aziz(1996) identifies limitations ofthegrowth accounting framework andsuggests thatitmaynot
besuitable asa“development accounting ”framework.
Sarel (1994) examines thedynamics ofeconomic growth, firstusing astandard neoclassical
growth model andanalternative growth model, consistent withendogenously determined initial
conditions, including capital flows, savings rates, andlabour supply. Thefindings suggest thatincreases
intheleveloftechnology including human capital canplayasignificant roleindevelopment.
Sarel (1995) examines thepossibility ofnonlinear effects ofinflation oneconomic growth.
Itfindsevidence ofasignificant structural break inthefunction thatrelates economic growth toinflation.
Thebreak isestimated tooccur when theinflation rateis8percent. Below thatrate,inflation appears
nottohaveanyeffect ongrowth oritmayevenhaveaslightly positive effect.
Mauro(1996)discussesthepossiblecausesandconsequencesofcorruptionongrowth,investment
andgovernment expenditure, andprovides evidence thatcorruption mayhaveconsiderable adverse
effects oneconomic performance, suggesting thatitisimportant forpolicy makers topayattention
tothisphenomenon.
(a) Growth andfiscal policy
Tanzi andZee(1996) discuss theexisting literature ontherelationship between thegrowth
ofcountries 'economies andvarious public finance instruments, suchastaxpolicy, expenditure policy
andoverall budgetary policy fromtheperspectives ofallocative efficiency, macroeconomic stability,
andincome distribution. Thepaper broadly concludes thatfiscal policy could playafundamental role
inaffecting thelong-run growth performance ofcountries. Xu(1994) alsosurveys theliterature on
taxpolicy implications invarious endogenous growth models andfound thatmuch depends onmodel
specifications relating theaccumulation ofhuman capital, technological innovation andthewaytax
revenues arespent.
Cashin (1994) develops anendogenous growth model oftheinfluence ofpublic investment,
public transfers anddistortionary taxation ontherateofeconomic growth. Theauthors found atrade-off
exists between thegrowth-enhancing provision ofpublic capital andtransfers andthegrowth diminishing
influence ofdistortionary taxes.WT/WGTI/W/8/Add.3
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Haque andKim(1994) analyse theimpact ofgovernment taxandsubsidy policy onimmigration
ofhuman capital andtheeffect ofsuchimmigration ongrowth andincomes. Inthecontext ofa
two-country endogenous growth model theyfound thathuman capital flight or“brain drain”arising
outofwage differentials, canbring about areduction inthesteady stategrowth rateofthecountry
ofemigration.
Milesi-Ferretti andRoubini (1994) examine theeffects oftaxation ofhuman capital, physical
capital, andforeign assets inamulti-sector model ofendogenous growth. Itisshown thatingeneral
thegrowth rateisreduced bytaxes oncapital andlabour (human capital) income. Inafurther paper
bythesame authors (1995) theylookspecifically attheeffects ofincome andconsumption taxation
andshow thatingeneral thetaxation offactor incomes (human andphysical capital) isgrowth-reducing.
Clements andLevy (1994) drawing ontheendogenous growth literature, review theimpact
ofpublic education expenditure onprivate sector capital formation, andreveal thatpublic education
outlays haveasignificant effect onprivate capital formation.
(b) Growth, saving andinvestment
Okagi, et.al.(1995) usemacroeconomic dataforasample ofcountries withdiverse income
levels inthecontext ofasimple endogenous growth model, andindicate thattheresponsiveness of
saving torealinterest ratechanges, varies forcountries according tothestages ofdevelopment.
Masson, et.al.(1995) examine thedeterminants ofprivate saving behaviour andsuggest that
there isapartial offset onprivate saving ofchanges inpublic saving andinforeign saving, that
demographics andgrowth areimportant determinants ofprivate saving rates, andthatinterest rates
andterms oftrade havepositive butlessrobust effects.
8. Other related literature totrade, investment andgrowth
Onisuka (1994) examines theeffects ofthesupply pressure (asmeasured byfull-employment
capacity andinventory), ofexports intheJapan-U.S. bilateral trade. Itisshown thatexport supply
pressures aremuch stronger inJapan’sexports thanintheU.S.exports.
Asilis andRivera-Batiz (1994) present ageographical theory oflocation andinterregional trade.
Location istreated asanendogenous variable byfirms, consumers andworkers. They validate the
positive roleofeconomic sizeandassociated specialization intrade. However, theimpact ofdistance
isshown tobemore complicated, “unnatural ”trade between distant partners emerges endogenously
from factor endowments andregional location decisions.
Haque, et.al.(1996) analyze theeconomic determinants ofdeveloping country creditworthiness
indicators forover60developing countries fortheperiod from 1980 to1993. Theresults indicate
thateconomic fundamentals explain alarge amount ofthevariation inthecredit ratings. Acountry ’s
regional location andthestructure ofitsexports were alsoimportant.
Bos(1996) analyses restructuring andprivatizing industrial enterprises inatransition economy,
andsuggests thatefficient restructuring canbeguaranteed ifonly oneparty isresponsible for
restructuring.
Cassard (1994) focuses ontheroleofoffshore centers andmarkets ininternational finance
during thepasttwodecades andthemigration offinancial activity from themajor financial centers
totheseoffshore markets. Itassesses thatinthecurrent liberalized andhighly competitive environment,WT/WGTI/W/8/Add.3
Page9
offshore centers willhavegreater difficulty inattracting financial activities awayfromthemajor financial
centers.
Dooley, et.al.(1996) develop anewtechnique formeasuring changes inthedegree ofcapital
mobility confronting adeveloping country thathasrestrictions oncapital flows. Looking attrends
inKorea, Mexico andthePhilippines overtheperiod fromtheearly1970s untilthe1980s, theyfound
thattherealcostofundertaking disguised capital flows declined bynearly 70percent.WT/WGTI/W/8/Add.3
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TRADE INVESTMENT FOR GROWTH AND DEVELOPMENT
FUND LITERATURE
World Economic andFinancial Surveys :
- WEO May1997: discusses openness andgrowth andFDIintransition countries
- WEO May1995: discusses FDIandgrowth intransition countries
- WEO StaffStudies September 1995: FDIintheWorld Economy byE.Graham
- WEO October 1995: discusses trade openness, growth, andfinancial flows
- WEO October 1994: discusses openness, investment, growth
- Issues andDevelopments inInternational Trade Policy 1992, 1995: discusses trade policy
issues ingeneral
Occasional papers:
Anumber ofstudies discuss openness, investment andgrowth inagroup ofcountries:
- "Adjustment forGrowth: TheAfrican Experience," Michael T.Hadjimichael, Michael Nowak,
Robert Sharer, andAmor Tahari, Occasional Papers, No.143
- "Reinvigorating Growth inDeveloping Countries: Lessons fromAdjustment Policies inEight
Economies," Goldsbrough, D;Coorey, S;Dicks-Mireaux, L;Horvath,B; Kochhar, K;
Mecagni, M;Offerdal, E;Zhou, J;Occasional Paper 139
- "IMF Conditionality: Experience Under Stand-by andExtended Arrangements, PartI:Key
IssuesandFindings,”Schadler,Susan;Bennett,Adam;Carkovic,Maria;Dicks-Mireaux,Louis;
Mecagni, Mauro; Morsink, James H.J.; Savastano, Miguel A,Occasional Paper, No.128
- "IMF Conditionality: Experience Under Stand-By andExtended Arrangements, PartII:
Background Papers, ”Schadler, Susan, ed;Bennett, Adam; Carkovic, Maria; Dicks-Mireaux,
Louis;Mecagni,Mauro;Morsink,JamesH.J.;Savastano,MiguelA,OccasionalPaper,No.129
- "Economic Adjustment inLow-Income Countries: Experience Under theEnhanced Structural
Adjustment Facility, ”Schadler, Susan; Rozwadowski, Franek; Tiwari, Sidharth; Robinson,
David O,Occasional Paper, No.106
Working Papers
- WP/97/103,JapaneseForeignDirectInvestmentandRegionalTrade,T.Bayoumi,G.Lipworth
- WP/97/60,InvestmentImplicationsofSelectedWTOAgreementsandtheProposedMultilateral
Agreement onInvestment, Mr.VockeWT/WGTI/W/8/Add.3
Page11
- WP/97/47, Intra-Industry Trade ofArabCountries: AnIndicator ofPotential Competitiveness,
O.Havrylyshyn, P.Kunzel
- WP/96/131, Capital Mobility andExchange Market Intervention inDeveloping Countries,
M.Dooley, D.Mathieson, L.Rojas-Suarez
- WP/96/124,InvestmentandGrowthintheMiddleEastandNorthAfrica,A.Bisat,M.El-Erian,
M.El-Gamal, F.Mongelli
- WP/96/119, Fiscal Policy andLong-Run Growth, V.Tanzi, H.Zee
- WP/96/116, Growth Accounting andGrowth Processes, J.Aziz
- WP/96/101/ Privatization andRestructuring: anIncomplete-Contract Approach, D.Bos
- WP/96/98, TheEffects ofCorruption onGrowth, Investment, andGovernment Expenditure,
P.Mauro
- WP/96/88, Macroeconomic Conditions andPressures forProtection Under Antidumping and
Countervailing Duty Laws -Empirical Evidence from theUnited States, M.Leidy
- WP/96/75, WhyisChina Growing SoFast?, Z.Hu,M.Khan
- WP/96/71, Recent Trade Policies andanApproach toFurther Reform intheBaltics, Russia,
andOther Countries oftheFormer Soviet Union, M.Leidy, A.Ibrahim
- WP/96/47, R&DSpillovers andGlobal Growth, T.Bayoumi, D.Coe, E.Helpman
- WP/96/9, TheEconomic Content ofIndicators ofDeveloping Country Creditworthiness,
N.Haque, M.Kumar, M.Nelson, D.Mathieson
- WP/96/8, Implications oftheUruguay Round forKenya, R.Chanda
- WP/95/129,RealInterestRates,RealExchangeRates,andNetForeignAssetsintheAdjustment
Process, T.Helbling, B.Turtelboom
- WP/95/98, Growth inEastAsia: What WeCanandWhat WeCannot InferFrom It,M.Sarel
- WP/95/66, Internal Migration, Center-State Grants andEconomic Growth intheStates ofIndia,
P.Cashin, R.Sahay
- WP/95/62,GrowthEffectsofincomeandConsumptionTaxes:PositiveandNormativeAnalysis,
G.Milesi-Ferretti, N.Roubini
- WP/95/59, Foreign Direct Investment intheWorld Economy, E.Graham
- WP/95/56, Nonlinear Effects ofInflation onEconomic Growth, M.Sarel
- WP/95/52, Hysteresis inExports, G.Giovannetti, H.Samiei
- WP/95/51, International Evidence ontheDeterminants ofPrivate Saving, P.Masson,
T.Bayoumi, H.SamieiWT/WGTI/W/8/Add.3
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- WP/95/28,ParadiseLost?Growth,ConvergenceandMigrationintheSouthPacific,P.Cashin,
N.Loayza
- WP/95/3, Saving Behavior inLow-and Middle-Income Developing Countries: AComparison,
M.Ogaki, J.Ostry, C.Reinhart
- WP/94/155, Human Capital Flight: Impact ofMigration onIncome andGrowth, N.Haque,
S.Kim
- WP/94/110, Devaluation, Relative Prices, andInternational Trade: Evidence fromDeveloping
Countries, C.Reinhart
- WP/94/138, OntheDynamics ofEconomic Growth, M.Sarel
- WP/94/122, Public Education Expenditure andOther Determinants ofPrivate Investment in
theCaribbean, B.Clements, J.Levy
- WP/94/110, HowDoes Foreign Direct Investment Affect Economic Growth, E.Borensztein,
J.DeGregorio, J.Lee
- WP/94/109, Economic Trends inAfrica: TheEconomic Performance ofSub-Saharan African
Countries, P.Dhonte, D.Ballali, G.Terrier
- WP/94/107,TheRoleofOffshoreCentersinInternationalFinancialIntermediation,M.Cassard
- WP/94/98, Effects ofMacroeconomic Stability onGrowth, Savings, andInvestment in
Sub-Saharan Africa -AnEmpirical Investigation, M.Hadjimichael, D.Ghura, M.Muhleisen,
R.Nord, E.Ucer
- WP/94/95,HowDoesIndustrializationAffecttheStructureofInternationalTrade?TheJapanese
Experience inthePacific Basin, 1975-85, S.Shirai, D.Huang
- WP/94/92, Government Spending, taxes, andEconomic Growth, P.Cashin
- WP/94/77, Taxation andEndogenous Growth inOpen Economies, G.Milesi-Ferretti,
N.Roubini
- WP/94/53, Supply Pressure andtheExport-Import performance intheJapan-U.S. Bilateral
Trade, Y.Onitsuka
- WP/94/44, Information Externalities Affecting theDynamic Pattern ofForeign Direct
Investment-The Case ofChina, D.Huang, S.Shirai
- WP/94/38, TaxPolicy Implication inEndogenous Growth Models, B.Xu,Bin
- WP/94/29, Competitiveness Indicators -ATheoretical andEmpirical Assessment, I.Marsh,
S.Tokarick
- WP/94/16, Geography, Trade Patterns, andEconomic Policy, C.Asilis, L.Rivera-Batiz