Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (8)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Barrell, R
Right arrow Articles by Pain, N
Right arrow Search for Related Content
Related Collections
Right arrow E60 - General
Right arrow F21 - International Investment; Long-Term Capital Movements
Right arrow F36 - Financial Aspects of Economic Integration
Right arrow F41 - Open Economy Macroeconomics
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Oxf Rev Econ Policy 1998; 14:152-167
© 1998 Oxford University Press and Oxford Review of Economic Policy Ltd

Article

Real exchange rate, agglomerations, and irreversibilities: macroeconomic policy and FDI in EMU

R Barrell
N Pain
National Institute of Economic and Social Research

Abstract

Fiscal policy in EMU has to be evaluated in the light of the changing nature of capital mobility in Europe and its effects on growth. Most arguments about the effects of fiscal policy in EMU assume that we live in a perfect competition world with a unique natural rate of output for each country. The removal of barriers to foreign direct investment (FDI) accompanied by the prevalence of imperfect competition mean that the natural rate of output is to be determined by locational competition. We show that FDI is influenced by relative costs and is attracted by agglomerations, and that the level of technology depends on the stock of FDI. Sustained expansionary fiscal policies will raise costs and make locations less attractive. Agglomerations could be destroyed by these higher costs, and the size of the nation will shrink. These effects will constrain policy-makers much more than the Stability Pact.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 National Institute Economic ReviewHome page
M. Weale and G. Young
Commentary
National Institute Economic Review, April 1, 2000; 172(1): 4 - 7.
[PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.